Economics, History, and Causation

17 Pages Posted: 4 Jan 2011

See all articles by Randall Morck

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Bernard Yin Yeung

National University of Singapore - Business School

Multiple version iconThere are 3 versions of this paper

Date Written: December 20, 2010

Abstract

Economics and history both strive to understand causation: economics using instrumental variables econometrics and history by weighing the plausibility of alternative narratives. Instrumental variables can lose value with repeated use because of an econometric tragedy of the commons bias: each successful use of an instrument potentially creates an additional latent variable bias problem for all other uses of that instrument – past and future. Economists should therefore consider historians’ approach to inferring causality from detailed context, the plausibility of alternative narratives, external consistency, and recognition that free will makes human decisions intrinsically exogenous.

Keywords: cuausality inference, difference in difference, treatment effect, instrumental variables, tragedy of the commons, latent, variable, bias, scientific method

JEL Classification: C01, C21, C31, G0, M2, N0

Suggested Citation

Morck, Randall K. and Yeung, Bernard Yin, Economics, History, and Causation (December 20, 2010). Available at SSRN: https://ssrn.com/abstract=1734504 or http://dx.doi.org/10.2139/ssrn.1734504

Randall K. Morck (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

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National Bureau of Economic Research (NBER)

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Asian Bureau of Finance and Economic Research ( email )

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Bernard Yin Yeung

National University of Singapore - Business School ( email )

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Singapore, 119245
Singapore
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65 6779 1365 (Fax)

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