Scientific Method - observe, develop a theory to explain, test - use new data to cross-check
Probability - the chance that a random variable will take a certain value
- (distribution must add to 100%)
Probalilty Distribution - set of all possible values of a random variables with the probabilities for each
Dependent, independent, discrete, continuous and limited in a range or not
Continuous distribution (points on a continuous scale)
Discrete distribution (clumps, not all values are possible)
Subjective Distribution - have someidea of probalities of outcomes
Objective Distribution - based on # of times an outcome occurs divided by the total number of outcomes
Correlation- when two+ variables show a systematic patrern of movement
Causation - when 1 variable actually causes the other variable to change
* Correlation DOES NOT imply causation.
* Canusaion implies correlation.
Regression vs. Causaiton - a significant sign on a regression coefficient DOES NOT imply causation.
Mean - add all, divide by total #
Median - sum average/middle value of mean and mode
Mode - max probality, most frequent value of variable
Standard deviation - average deviation from the mean
CV (coefficient of variation) - in relation tp mean it ttells how signigicant/how much variance)
Measure of Associaion - relationship between variables
1. positive, negative, none
2. covariance (cov) and correlation (p) - makes relative to variance
*Sometimes it is heapful to figure the prooduct of deviations and the sum of squared deviations
Regression - process of finding line or curve that "best" fits a given set of data points (F. Galton, 1886)
OLS linear regression - smalles sumof sqaure error for all points from the line/curve
- good for estimating what comes next
- good at average
Multivariate - plane of best fit (rather than a line)
1. structural or reduced forms
2. robustness or specification tests
3. intuition or hedonics
Two books mentioned in class concerning how we know:
1. On being certain: believing you are right even when you're not by Robert Burton
BD171 .B87 2009
Covering: the feeling of knowing, how do we know what we know?, classification of mental states and neural networks, when does a thought begin?, genes, perceptual and sensational thoughts, reason and objectivity, faith, etc.
2. Thinking Fast and Slow by Daniel Kahneman
BF441 .K238 2011
The author, a recipient of the Nobel Prize in Economic Sciences for his seminal work in psychology that challenged the rational model of judgment and decision making, has brought together many years of research and thinking. He explains two systems that drive the way we think. System 1 is fast, intuitive, and emotional; System 2 is slower, more deliberative, and more logical.