Mauling the method of moments into kinky least squares

The major challenge of econometrics is assessing the essentials of relationships between
empirical phenomena, where this has to be based on data which could not be collected from
controlled experiments. This calls for inference procedures which can handle both exogenous
and endogenous explanatory variables. For proper interpretation of econometric inference
various assumptions of a technical statistical nature should hold, whereas for some of these
conditions their validity cannot be corroborated. Therefore, they simply have to be adopted,
either on the basis of conventions or other often highly subjective convictions. In this note
we demonstrate that some of these crucial but statistically unveri…able assumptions can be
replaced by others, in order to make inferences not only more credible, but by the same stroke
more robust, e¢ cient and accurate as well.