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As hypothesis-testing goes, that strikes me as putting the cart before the horse. If they have a hypothesis for how the data should behave, then why are they not just fitting directly to their hypothesis?
Because they don't have a hypothesis. Factor analysis should be seen as an exploratory data analysis technique.

If you then colour-code the points and find that the former Soviet Republics and the English-speaking countries form two distinct clusters in the sense that the within-group variance in the two-factor space is smaller than the between-group variance, then you have discovered something. Assuming that the two factors, together, explain a sufficiently high amount of the overall variance to begin with.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Mon Apr 20th, 2009 at 04:24:23 AM EST
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