C H AP T E R 1 1 Modeling (Optional) Chapter Outline 11.1 Causality 333 11.2 Linear Models 334 11.3 Polynomial Models 335 Interpreting Quadratic Models 336 11.4 Power Functions 337 Negative Elasticities 339 The Cobb-Douglas Production Function 342 11.5 Logarithmic Models 344 11.6 Growth Models 345 The Miracle of Compounding 346 Frequent Compounding 347 Continuous Compounding 348 11.7 Autoregressive Models Exercises 353 350 Econometricians, like artists, tend to fall in love with their models. --Edward Leamer