We discuss different aims of testing: theory testing, validity testing, simplification testing and decision making. Different testing methodologies may serve these aims. In particular, the approaches of Fisher and Neyman-Pearson aze considered. We discuss the meazung of statistical significance. Significance tests in the Journal of Econometrics are evaluated. The paper concludes with a challenge to ascertain the impact of statistical testing on economic thought.

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ohn !~~futh's famous tgót article in Econome[rica generated a landslide in cconomics, bc it with somc dclay. Today, wc spcak of a Ru[iona! Expec[aliars Reuolulion In Alatroeconanics (see e.g. Begg, tg82). This development is quite remarkable. Firstly, because of the force wíth which this Revolution changed

Introduction vii 1 The philosophy of induction 1 2 Probability and indifference 21 Intermezzo: a formal scheme of reference 28 3 Reactive frequency and induction 33 4 Probability and belief 67 5 The theory of simplicity 98 6 From probability to econometrics 119 7 Econometric modelling 142 8 In search of homogeneity 180 9 Positivism and the aims of econometrics 213 10 Probability, econometrics and truth 262 Personalia 276 References 281 Name Index 299 Subject Index 307 v 1 The philosophy of induction [S]ome other scientists are liable to say that a hypothesis is de®nitely proved by observation, which is certainly a logical fallacy; most statisticians appear to regard observations as a basis for possibly rejecting hypotheses, but in no case for supporting them. The latter attitude, if adopted consistently, would reduce all inductive inference to guesswork.