Suppose 32 per cent of the households in a certain district are classified as ‘poor.’ If you randomly pick ten households (with replacement), what is the probability that the first two households in the sample are poor, while the remaining eight are not? Thus reads one of the example problems in ‘Principles of Econometrics: An introduction (using R)’ by Neeraj R. Hatekar (www.sagepublications.com).
Econometrics is a way of making sense of the real world, the author writes in the preface. Here is another example, about two desperadoes A and B playing a game of Russian roulette, each with a revolver having a six-cylinder magazine in which five cylinders are empty. “They take turns in putting the gun to their foreheads and pulling the trigger. After each attempt, the magazine is spun to a random position. The game ends when the trigger is pulled six times without the fatal shot being fired. Desperado A begins the game. What is the distribution of the number of times Desperado A pulls the trigger?”
Professional edge
R in the book’s subtitle is a reference to the programming language, code of which Hatekar provides in every chapter. Urging students to experiment with programs as a method to understand the flexibility and versatility of the language, he suggests that the use of software in econometrics can give students a substantial professional edge.
Citing the famous Caribbean cricket writer C. L. R. James for the insightful poser, ‘What do they know of cricket who only cricket know?’ the author says the same applies to science. That it is not merely a dispassionate search for truth, but also a social activity that scientists engage in.
The objectives of science, its methods of judging scientific success and failure and its progress are inseparable from the wider social context within which scientists live and work, Hatekar reminds. “In this book, an attempt has been made to provide at least a fleeting introduction to the major dramatis personae. I hope this will provide some context to what otherwise may appear more asocial than it actually is.”
While much of the book is aimed at the serious student, you can take comfort from a snatch in the ‘acknowledgments’ page about tomcat Mau ‘which brought a fresh twist to life’ by giving the author’s family ‘firsthand experience of living with a feline mafia don. He continues to be true to his birth and upbringing on the campus of a University by recklessly risking life and limb to satisfy what to lesser humans would be mere idle curiosity.’
If the country’s economic advisors were to be action-oriented like Mau, they would perhaps be successful in crafting effective policies to control the corrosive tax called inflation rather than idly allow the runaway prices to only make an increasing percentage of people precariously ‘poor.’
For the hands-on student of economics.
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