Chris Blattman

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Angus Deaton on the causal fetish

Famed development economist Angus Deaton writes in the Royal Economic Society Newsletter:

So what is it that economics brings to malaria, child soldiering, or the consequences of parole boards? Price theory is certainly no longer our comparative advantage. It is not that it cannot be applied to a wide range of topics, as Gary Becker and others have repeatedly shown.

But if current graduate students know anything of price theory, it would have had to have been self-taught, because it is no longer on the curriculum in the “best” American departments. (Except Chicago where it hangs on by a whisker, and where in a last ditch attempt to preserve it from extinction, Becker, Kevin Murphy, and Steve Levitt are running an intensive price theory summer camp for graduate students from outside of Chicago.)

The advantage that economists have, if advantage it is, is their data handling skills (most social sciences are far from comfortable with millions of observations, to say the least), as well as their well-developed armory of econometric techniques. If the typical thesis of the eighties was an elaborate piece of price theory estimated by non-linear maximum likelihood on a very small number of observations, the typical thesis of today uses little or no theory, much simpler econometrics, and hundreds of thousands of observations. (The amount of computing time has remained more or less constant.)

The extent to which data can effectively be substituted for theory is clearly a topic that is being actively explored, at least empirically.

In this last point, Deaton is being diplomatic. Elsewhere he’s mourned the deficiencies of graduate training in theory in much stronger terms. Either way, I think he’s right (even if my job market paper is a target of the critique). The fetish for causal identification has taken over the junior ranks of the profession, especially at schools like Berkeley, Harvard, and MIT.

As I see it, however, the data-driven econometric approach is a reaction to the previous overemphasis on (often obscure) theory. Now we see a much more useful back-and-forth between theory and empirics; data are used to question basic assumptions about human behavior, and generate new and better theory in turn. There is a place in economics for both.

If anything, high quality data and data collection remain undervalued in the profession. It is merely the search for causality that has hijacked the train. What a strange state of affairs for a supposed science.

More essays by Deaton here (via MR).

5 Responses

  1. So, I have been out of the academic game for a while. In fact, I attending Udry’s job market talk at Berkeley when I was graduate student there. So, does Udry fall as applied price theory? I am pretty sure he is not part of the “fad”. I am just trying to understand what is meant by applied price theory in development economics.

  2. I would interested to see where Deaton has talked about theory vs. empirics as well. I do think it gets to be a problem when people start looking for research topics on the basis of whether they can come up with a clever identification strategy, rather than whether the topic is relevant, and calling that “applied economics.”

  3. I liked this article, too. In my training, we didn’t get a whole lot of the causal preoccupation (we got a lot on exogeneity, but I don’t know if I really saw that as the same thing either at the time or really now), and I got crucified in a graduate seminar talk when we hired an assistant looking for careful identification and she started asking me questions. God forbid you don’t have very good identification in an applied paper.

    But isn’t this just how science progresses? The lack of careful attention to causality before, now an over-attention to it? But I figure it all comes out in the wash eventually, and sooner than later, economists will be better off for this phase. I think Deaton is right that it’s much more difficult to wow someone with IV today than it was ten years ago. I wonder if some of the people we associate with those early natural experiment papers would be as successful getting their papers published today as they were then. I feel like I see amazingly clever papers getting rejected at journals all the time.

    It’s a very hard equilibrium to get out of, too, if you are junior. I listen to older, senior, tenured colleagues poop on this fetish all the time, but that’s easy for them to say. Plus, it’s not all bad. When the methods ultimately come in service of an important policy question, we learn a lot when the causality issues really are dealt with adequately.

  4. I never knew Angus Deaton was so attached to theory. Does anyone have links to good articles or debates on the topic of empirics versus theory, particularly in development?

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