In my last project I had to find theoretical limits for a *psychometric* index involving *Likert scale data* (aka *categorical data*). After successfully finding it, I decided to test the results in a simple *Monte-Carlo simulation*.

**To learn about product decomposition of uniform distribution click here or keep on reading**

Econometrics is a separate discipline from statistics/probability/machine learning for a reason. The primary aim of econometrics and economics in general is interpretability. Economists could easily build very realistic models with hundreds of moving parts/variables, but they don’t do it, because they aim to make models as simple as possible.

Read more...This week I’ve been working on a research paper based on a very simple idea which, hopefully, can solve an important problem in applying machine learning techniques in economics — the interpretability. So, if you recall, the neural networks is the generalization of a logit model where sigmoid of a linear combination of inputs is used iteratively.

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