How useful is a wrong model? Information-sharing for inference under mean misspecification in linear models

Abstract

As almost all models are wrong, a mean model's usefulness is often accepted as sufficient justification for its use. In practice, however, standard statistical theory breaks when the mean model fit is imperfect, limiting this usefulness. This tension between fit and usefulness arises from a dichotomization of model fit: the model is either right or it is wrong. Motivated by the linear regression framework, we propose an alternative viewpoint that leverages the mean model's usefulness without assuming it is right or wrong. We define a new model usefulness index and use it to share information across individual observations through the mean model. The result is an estimator of each outcome's mean that shrinks individualized means towards the shared mean model, with the degree of shrinkage governed by this usefulness index. We draw connections between our estimator and the James-Stein estimator and establish when and how our estimators of the individualized means yield more efficient inference than model-based and non-model-based alternatives. We also propose a data-dependent estimate of the usefulness index that balances statistical intuition with efficiency considerations. We illustrate our method's practical value in an analysis of personal tracker data.