Economics, History, and Causation

18 Pages Posted: 18 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 Governance Institute (ECGI); 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: January 2011

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.

Suggested Citation

Morck, Randall K. and Yeung, Bernard Yin, Economics, History, and Causation (January 2011). NBER Working Paper No. w16678, Available at SSRN: https://ssrn.com/abstract=1740308

Randall K. Morck (Contact Author)

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Bernard Yin Yeung

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