022: Josh Angrist on Taking the Con Out of Econometrics – Kung Fu Style

Master Joshway, better known as Josh Angrist, is the Ford Professor of Economics at MIT and a ResearchAssociate in the NBER’s programs on Children, Education, and Labor Studies. Josh received his B.A. from Oberlin College, spent time as an undergraduate studying at the London School of Economics and as a Masters student at Hebrew University. He completed his Ph.D. in Economics at Princeton.

Angrist’s research interests include the effects of school inputs and school organization on student achievement; the impact of education and social programs on the labor market; the effects of immigration, labor market regulation and institutions; and econometric methods for program and policy evaluation.

Josh is a Fellow of the American Academy of Arts and Sciences, The Econometric Society, and has served on many editorial boards and as a Co-editor of the Journal of Labor Economics.

Josh is the author (with Steve Pischke) of Mostly Harmless Econometrics as well as Mastering ‘Metrics.

Find out in this episode how Josh went from High School drop-out to Professor of Economics at MIT.

Never forget that, at the most, the teacher can give you fifteen percent of the art. The rest you have to get for yourself through practice and hard work. I can show you the path but I can not walk it for you – Kung Fu Master Tan Soh Tin

Economic Themes:

In this interview, Josh mentions and discusses: econometrics, clinical trials, randomized trials, instrumental variables, regression, health insurance, longitudinal studies, selection bias, fairness, human capital, the quantity-quality trade-off, specification testing, robustness, time series, BLUE, Gauss-Markov, labor economics, regression, reverse causality, spurious correlation and data mining.

Economists:

In this interview, Josh mentions: Gary Becker, Shoshana Grossbard, Marina Adshade, Steve Pischke, Chris Blattman, Matt Holian, Christopher Sims, Russell Roberts, Greg Mankiw, Amy Finkelstein, Nancy Qian, Erlich, Ed Leamer, Steven D. Levitt, Stephen J. Dubner, Phil Oriopolis, Alan Kreuger, Orley Ashenfelter, David Card, Whitney Newey, Guido Imbens, Gary Chamberlain, Allan Meltzer, Scott Richard and Daniel Hamermesh.

On Mastering ‘Metrics: The intersection of the highway is a metaphor for causality. This is the theme of the book – ‘you’re facing a choice you’ll never know what the counterfactual was. You can imagine it’. The goal of econometrics is to reveal that in some way through statistical methods or experimentation. – Josh Angrist.

Josh and Steve’s book, Mastering ‘Metrics, is Kung Fu themed and they use that as a vehicle for humour.

Find out:

• about Master Joshway and Master Steveway – the Kung Fu Economists.

• how Josh went from working in a mental hospital to working in MIT.

• why and how the Kung Fu theme was adopted by Josh and Steve.

• where the names Master Joshway and Master SteveFu came from.

• why Josh is a critic of macroeconomics.

• the difference between traditional applied micro and applied micro today.

• Josh’s views on using assumptions in microeconomics.

• how to design an microeconomics experiment using randomized trials.

• about health insurance in the US.

• about Obama Care or the Affordable Care Act.

• the Oregon Health Experiment where health insurance was offered as a lottery.

• about Ireland’s upcoming health insurance policy change.

• about the ‘Furious Five’ – not Kung Fu Panda – but the core research methods.

• what’s a good economics experiment for family size.

• where babies come from – Storks?

• what are the chances of US married couples having a 3rd child if the first two are the same gender.

• if people who come from large family sizes have worse outcomes?

• about Gary Becker’s quantity-quality trade-off and how it relates to family size in China.

• if capital punishment deters homicide.

• why and how econometrics and specification tests are better today than they were in the past.

• why Freakonomics is a must read for students or potential students of economics.

• why being born later in the year is good for your educational attainment.

• about Josh’s lucky breaks in life.

• why Josh dropped out of school at 16 and about his army sergeant stripes.

• about Josh’s hyper Jim Kramer-like teaching style.

• about an amazing list of economists that have personally influenced Josh.

• what helps Josh clear his head and keep in shape.

Macro v Micro

“Macro is a very theory-driven, model-driven field. They don’t run enough regressions or collect enough data and look for good experiments” – Josh Angrist.

“There’s nothing wrong with assumptions. That’s a misguided criticism. We have to simplify the world to learn anything about it. Otherwise you’re lost in the details.” – Josh Angrist.

“Every research project begins with the question. I have to convince my students of this and sometimes my colleagues – it isn’t let data come first, even though we’re very data-driven people. The first step is the question where it’s likely to lead me to a good research design.”

“In US census data, if you take married two-parent families who’d have at least two children, , the probability of having a 3rd child when they have a mixed sex is 0.37, and that goes to 0.43 or 0.44 when they either have two boys or two girls.”

“Ed Leamer in his paper, Let’s Take the Con Out of Econometrics, stated that nobody takes anybody else’s data analysis seriously. Nobody believes anything anybody else does.” Steve Pischke and Josh Angrist, in their paper, argue that that’s no longer true.

“The purpose of our book is to try to bring the way econometrics is taught in line with the way applied micro, at least, is done.” – Josh Angrist.

The traditional econometrics canon is built around a heavy mathematical framework that focuses on technical concerns, assumptions and many issues that are second-order statistics concerns, like heteroskedasticity or whether the model is really linear, that makes little sense and has nothing to do with modern empirical practice.

Recommended Books:

• Mastering ‘Metrics: The Path from Cause to Effect by Josh Angrist and Steve Pishcke
• Mostly Harmless Econometrics by Josh Angrist and Steve Pishcke
• The Hitch-Hiker’s Guide to the Galaxy by Douglas Adams
• Freakonomics:  A Rogue Economist Explores the Hidden Side of Everything by Steven D. Levitt and Stephen J. Dubner

Josh Angrist on Freakonomics: “ It’s so engaging and well written and covers such interesting questions that I think it wins us a lot of converts to studying economics. My daughter got interested in economics by reading Freakonomics and she majored in economics.”

Papers:

• The Credibility Revolution in Empirical Economics: How Better Research Design is Taking the Con out of Econometrics by Josh Angrist and Steve Pischke.
• Let’s Take the Con out of Econometrics (1983) by Ed Leamer 
• Does Compulsory School Attendance Affect Schooling and Earnings? (1991) by Josh Angrist and Alan Kreuger. 

Datasets:

• RAND Health Insurance Experiment
• The Oregon Health Insurance Experiment

Blog Posts:

• Kung Fu ‘Metrics by Chris Blattman
• Econometrics and Kung Fu by Matt Holian

Podcast Episodes:

• 093: Arthur Charpentier on Freakonometrics, Machine Learning and Big Data

Where To Find Josh Angrist:

• Website: www.masteringmetrics.com
• Facebook: Mastering ‘Metrics

Resources Used in the Episode:

www.incompetech.com Cartoon Battle Kevin McLeod Far East

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