A FIRST LESSON IN ECONOMETRICS (This is an extension of John J

Siegfried’s article in Journal of Econometrics)

Every budding econometric student must learn early that it is never in good taste
to express the sum of two quantities in the form

1+1=2 (1)

Any first year college student is aware that

1 = ln e (2)

and further that

1 = sin2 q + cos2 q (3)

In addition, it must be obvious to the casual reader that

∞
1
2=∑ n (4)
n =0 2

Therefore equation (1) can be rewritten more scientifically as

∞
1
2
ln e + sin q + cos q = 2
∑2
n =0
n (5)

We all learned in grade school that

1 = cosh p 1 −tanh 2
p (6)

and since
δ
 1
e = lim 1 +  (7)
δ →∞
 δ

equation (5) can be easily simplified to read:

δ
  1 
ln δlim 1 +   + (sin2 q + cos2 q) =
 →∞ δ  
∞
cosh p 1 − tanh 2
p
∑
n =0 2n
(8)

If we note that
0! = 1 (9)
And recall that the inverse of the transpose is the transpose of the inverse, we
can unburden ourselves of the restriction to one dimensional space by
introducing the vector X, where

(X )' −1
− ( X −1 ) = 0
'
(10)

Combining equation (9) with equation 10 gives

[( X ′) −1
(
− X −1 != 1 )]
'
(11)

Which when inserted into equation (8) reduces our expression to

  ′ 1 
( ) (
ln lim ( X ′) − X −1  +  + sin 2 q + cos 2 q =
−1
)
δ →∞ 
   δ 

∞
cosh p 1 − tanh 2
p
∑
n =0 2 n
(12)

At this point it should be obvious to everyone that equation (12) is much clearer
and more easily understood than equation (1). Other methods of similar nature
can be used to simplify equation (1), but these will become obvious once you
grasp the underlying principles of econometrics.