Richard Stone, Demand Theory and the Emergence of Modern Econometrics
In 1945, the year Richard Stone first published on demand analysis, there was no consensus on how economic data should be analyzed; but over the decade 1945-54 least squares regression emerged. This process may be seen in Stone's work, but Stone also had a major influence on the emergence and formalization of the methodology. He was influenced by the Cowles Commission work, but did not see simultaneity as a major practical problem. His abandonment of confluence analysis was in part due its lack of statistical foundations, but also to his perception of residual serial correlation as a dominant problem in time-series econometrics. Copyright 1991 by Royal Economic Society.