Volume 4 • Issue 2 | July 2020
Decision Making versus Testing: A Changing of the Guards in Empirical Research?
William M. Briggs, Hung T. Nguyen
Abstract:
In this paper we will elaborate and give support to Manski's central message in "Statistical decision theory should supplant hypothesis testing" (Manksi, 2019; see also Manski, 2020). Decisions should take the place of testing. This review should benefit practioners in empirical research of econometrics and in statistics in general. We emphasize that Wald's Statistical Decision Theory should be used in empirical research instead of "traditional" hypothesis testing (both frequentist and Bayesian testing), since hypothesis testing is only a one-sized-fits-all way to make decisions. The goal of empirical research is to make optimal decisions, and it is possible to make decisions without using testing.