Dear All-

Sir Clive Granger died this week at the age of 74. He was known as an econometrician and wrote many wonderful papers to help economists understand the world better. One of his most important pieces was the “Granger-Causality” test. This was very useful to help economists determine if one variable that was correlated with another variable might also cause this variable to occur. Statistically, it tried to determine if one variable preceded another variable in time to infer statistical causation. He also worked on a concept known as “co-integration” which attempted to determine how closely two variables were related to each other over time.

He won the Nobel prize in 2003 for his work in econometrics. He was instrumental in building the economics department of the University California at San Diego into a respected department, especially in the field of econometrics. Much of his path-breaking work, however, was done at the University of Nottingham. In fact, the building that houses the economics department is now named the Sir Clive Granger building.

I personally enjoyed two books written by Granger. The first book is entitled

Forecasting Economic Time Series and is very mathematical. It’s not a first easy read, but after you play with it a little, it really clarifies some concepts in time series econometrics. But perhaps the book I used most when I first started building forecasting models on Wall Street was his easy-to-read book entitled Forecasting in Business and Economics. It’s a wonderful little treat. I also like a lot of the quotes he placed in the book. I will mention two in particular:

An unsophisticated forecaster uses statistics as a drunken man uses lamp-posts — for support rather than illumination.   Andrew Lang

I love this quote and I also see many economists well-versed in statistics take this approach in their strive for publication success. It’s something we should all remember to avoid.

A good forecaster is not smarter than everyone else, he merely has his ignorance better organized.  Presumably a quote from Granger

I love this quote as well. After all, one of the beauties of mathematics, econometrics, and statistics is that if we use them cleverly we might have an edge on understanding things that others find too complicated.

The last time I saw him in person was several years ago at an AEA meeting. He looked quiet, but in good form. Thanks Sir Clive.

Sincerely

Ludwig

June 2, 2009