I went to Washington DC early this week to participate an NBER conference on Innovation Policy and Economy, there are a lot of government officials participating. A professor from Northwestern (DANIEL DIERMEIER, he is a great presenter, I liked his slides so much) quoted Rumsfeld’s famous sentence on "known knowns and unknown unknowns".
"Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know."
That was funny, and is quite true.
His comment on Iraq’s Mass destruction weapons is also hilarious:
"the absence of evidence is not the evidence of absence"
To me, these are very good guidance to research! In econometrics, known knowns are probably those observables, known unknowns are usually captured by the error term. The big headache is unknown unknowns which can give us headache of missing variable issues.
The second quote tells us that insignificance of a regression does not mean there is no relationship between the dependent and independent variables.
Oh, here is another one:
"I don’t know what the facts are but somebody’s certainly going to sit down with him and find out what he knows that they may not know, and make sure he knows what they know that he may not know."
Anyone who took a course in game theory should ring a bell here on the definition of common knowledge: I know you know, and you know that I know you know, I know that you know I know you know, … …