The “Probabilistic Revolution”
Prior to the 1930s, probability theory was commonly rejected as being unsuitable as a basis for analyzing economic data. . . . Changes took place from the 1930s and onwards as more and more statistical methods were tried in the arena of applied economics, and as concern grew stronger to get the applied works using these methods fully justified in standard economics. The changes were also accelerated by the substantial progress made in mathematical statistics with regard to multivariate models since the 1920s, and in the axiomatization of probability theory in. the early 1930s. There thus rose a movement to transform economics into a real science. . . . By the time that Trygve Haavelmo argued for a full adoption of the probability approach as the foundation of econometric theory in the early 1940s (Haavelmo 1944)—later referred to as the `Haavelmo revolution’—it hardly stirred up any fundamental conceptual shifts of a revolutionary significance in econometrics or economics.
KeywordsProbability Approach Classical Linear Model Full Adoption Joint Frequency Distribution Minimum Variance Linear
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