The Loss Function Has been Mislaid

McCloskey, Donald N., “The Loss Function Has Been Mislaid,” The American Economic Review Vol 75, No 2 (1985), 201-205.

  • Statistical significance is not the same as economic significance (most authors, most professors, and their audiences confuse this point.
  • Significance tell us how (un)likely it is that an observed coefficient is close to its actual value.
  • It is the scientist who must decide whether that estimated value is large enough to have intuitive/economic meaning.