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On the Construction of Prior Information – An Info-Metrics Approach

Amos Golan ^a,b,c

Robin L. Lumsdaine ^a,d,e

^aInfo-Metrics Institute, American University, Washington, DC, USA

^bDepartment of Economics, American University, Washington, DC, USA

^cSanta Fe Institute, Santa Fe, NM, USA

^dKogod School of Business, American University, Washington, DC, USA

^eNational Bureau of Economic Research (NBER), Cambridge, MA, USA

Essays in Honor of Aman Ullah

ISBN: 978-1-78560-787-5, eISBN: 978-1-78560-786-8

Publication date: 23 June 2016

Abstract

Although in principle prior information can significantly improve inference, incorporating incorrect prior information will bias the estimates of any inferential analysis. This fact deters many scientists from incorporating prior information into their inferential analyses. In the natural sciences, where experiments are more regularly conducted, and can be combined with other relevant information, prior information is often used in inferential analysis, despite it being sometimes nontrivial to specify what that information is and how to quantify that information. In the social sciences, however, prior information is often hard to come by and very hard to justify or validate. We review a number of ways to construct such information. This information emerges naturally, either from fundamental properties and characteristics of the systems studied or from logical reasoning about the problems being analyzed. Borrowing from concepts and philosophical reasoning used in the natural sciences, and within an info-metrics framework, we discuss three different, yet complimentary, approaches for constructing prior information, with an application to the social sciences.

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Acknowledgements

Acknowledgments

This paper has benefitted from discussions with Ansgar Wohlschlegel and conference participants at the Conference of Advances in Econometrics: Essays in Honor of Aman Ullah (13–15 March 2015). We would also like to thank the editors and the reviewers for their very helpful feedback and suggestions. Lumsdaine is grateful for the generous hospitality of both Erasmus University Rotterdam and the University of Portsmouth (UK) during her sabbatical, that facilitated progress on this paper.

Citation

Golan, A. and Lumsdaine, R.L. (2016), "On the Construction of Prior Information – An Info-Metrics Approach", Essays in Honor of Aman Ullah (Advances in Econometrics, Vol. 36), Emerald Group Publishing Limited, Leeds, pp. 277-314. https://doi.org/10.1108/S0731-905320160000036017

Publisher

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Emerald Group Publishing Limited