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Chapter 1
THE NATURE AND SCOPE OF ECONOMETRICS
1.1 WHAT IS ECONOMETRICS?
Definition
（1）Econometrics: economic measurement.
（2）Econometrics: the social science in which the tools of economic theory, mathematics, and statistical inference are applied to the analysis of economic phenomena.
（3）Econometrics: the result of a certain outlook on the role of economics, consists of the application of mathematical statistics to economic data to lend empirical support to the models constructed by mathematical economics and to obtain numerical results.
1.2 WHY STUDY ECONOMETRICS?
1.Economic theory and Econometrics
（1）Economic theory makes statements or hypotheses that are mostly qualitative in nature. But the theory
itself does not provide any numerical measure of the
strength of the relationship between the two.
（2）Econometrics gives empirical (i.e., based on observation or experiment) content to most economic theory and provide the numerical estimates that the economic theory does not do.
1.2 WHY STUDY ECONOMETRICS?
2.Mathematical economics and Econometrics
（1） Mathematical economics express economic theory in mathematical form or equations without regard to measurability or empirical verification of the theory.
（2） Econometrics empirical verification of economic theory. That is: uses mathematical models proposed by the mathematical economist to do empirical testing.
1.2 WHY STUDY ECONOMETRICS?
3. Economic statistics and Econometrics
（1）Economic statistics is mainly concerned with collecting, processing, and presenting economic data in the form of charts, diagrams, and tables. The data thus collected constitute the raw data for econometric work.
（2）Econometrics concerned with using the collected data to test economic theories.
Because the economics data a
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