Neurons in the neocortex code and compute as part of a locally interconnected population. Large-scale multi-electrode recording makes it possible to access these population processes empirically by fitting statistical models to unaveraged data. What statistical structure best describes the concurrent spiking of cells within a local network? We argue that in the cortex, where firing exhibits extensive correlations in both time and space and where a typical sample of neurons still reflects only a very small fraction of the local population, the most appropriate model captures shared variability by a low-dimensional latent process evolving with smooth dynamics, rather than by putative direct coupling. We test this claim by comparing a latent dynamical model with realistic spiking observations to coupled generalised linear spike-response models (GLMs) using cortical recordings. We find that the latent dynamical approach outperforms the GLM in terms of goodness-of-fit, and reproduces the temporal correlations in the data more accurately. We also compare models whose observations models are either derived from a Gaussian or point-process models, finding that the non-Gaussian model provides slightly better goodness-of-fit and more realistic population spike counts.