2021 Noble Peace Prize In Economic Sciences Has Been Awarded To Joshua D. Angrist And Guido W. Imbens For Their Methodological Contributions To The Analysis Of Causal Relationships

news Oct 11, 2021 0 123
ugochukwu Franklin Amadike @ugochukwu
2021 Noble Peace Prize In Economic Sciences Has Been Awarded To Joshua D. Angrist And Guido W. Imbens For Their Methodological Contributions To The Analysis Of Causal Relationships
BREAKING NEWS
The Royal Swedish Academy of Sciences has decided to award the 2021 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel with one half to David Card “for his empirical contributions to labour economics” and the other half jointly to Joshua D. Angrist and Guido W. Imbens “for their methodological contributions to the analysis of causal relationships.”

This year’s laureates – David Card, Joshua Angrist and Guido Imbens – have provided us with new insights about the labour market and shown what conclusions about cause and effect can be drawn from natural experiments. Their approach has spread to other fields and revolutionised empirical research.

Many of the big questions in the social sciences deal with cause and effect. How does immigration affect pay and employment levels? How does a longer education affect someone’s future income? These questions are difficult to answer because we have nothing to use as a comparison. We do not know what would have happened if there had been less immigration or if that person had not continued studying.

However, this year’s laureates have shown that it is possible to answer these and similar questions using natural experiments. The key is to use situations in which chance events or policy changes result in groups of people being treated differently, in a way that resembles clinical trials in medicine.

Using natural experiments, David Card has analysed the labour market effects of minimum wages, immigration and education. His studies from the early 1990s challenged conventional wisdom, leading to new analyses and addi¬tional insights. The results showed, among other things, that increasing the minimum wage does not necessarily lead to fewer jobs. We now know that the incomes of people who were born in a country can benefit from new immi-gration, while people who immigrated at an earlier time risk being negatively affected. We have also realised that resources in schools are far more important for students’ future labour market success than was previously thought.

Data from a natural experiment are difficult to interpret, however. For example, extending compulsory education by a year for one group of students (but not another) will not affect everyone in that group in the same way. Some students would have kept studying anyway and, for them, the value of education is often not representative of the entire group. So, is it even possible to draw any conclusions about the effect of an extra year in school? In the mid-1990s, Joshua Angrist and Guido Imbens solved this methodological problem, demonstrating how precise conclusions about cause and effect can be drawn from natural experiments.

Learn more:
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Franklin Amadike Franklin Amadike Oct 11, 2021
Guido W. Imbens – awarded the 2021 prize in economic sciences – was born in 1963 in the Netherlands.

He is the Applied Econometrics Professor and Professor of Economics, Stanford University, USA.

https://www.gsb.stanford.edu/faculty-research/faculty/guido-w-imbens Re: 2021 Noble Peace Prize In Economic Sciences Has Been Awarded To Joshua D. Angrist And Guido W. Imbens For Their Methodological Contributions To The Analysis Of Causal Relationships
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Franklin Amadike Franklin Amadike Oct 11, 2021
This year's economic sciences laureate Joshua D. Angrist was born in 1960 in Columbus, Ohio, USA.

He is a Ford Professor of Economics at Massachusetts Institute of Technology (MIT), Cambridge, USA.

https://economics.mit.edu/faculty/angrist Re: 2021 Noble Peace Prize In Economic Sciences Has Been Awarded To Joshua D. Angrist And Guido W. Imbens For Their Methodological Contributions To The Analysis Of Causal Relationships
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Franklin Amadike Franklin Amadike Oct 11, 2021
This year’s economic sciences laureates have shown that it is possible to answer questions in the social sciences using natural experiments. The key is to use situations in which chance events or policy changes result in groups of people being treated differently, in a way that resembles clinical trials in medicine.

We can imagine a natural experiment as if it randomly divides individuals into a treatment group and a control group. The treatment group is entitled to participate in a programme while the control group is not. This year’s economic sciences laureates Joshua Angrist and Guido Imbens showed that it is possible to estimate the effect of the programme by applying a two-step process (known as the instrumental variables method). The first step investigates how the natural experiment affects the probability of programme participa¬tion. The second step then considers this probability when evaluating the effect of the actual pro¬gramme. Given a few assumptions, which Imbens and Angrist formulated and discussed in detail, the researchers can thus estimate the impact of the programme, even when there is no information about who was actually affected by the natural experiment. One important conclusion is that it is only possible to estimate the effect among the people who changed their behaviour as a result of the natural experiment. It is not possible to determine which individuals are included in this group, but we can determine its size. The effect for this group has been named the local average treatment effect, LATE.

Joshua Angrist and Guido Imbens thus showed exactly what conclusions about cause and effect can be drawn from natural experiments. Their analysis is also relevant for randomised experiments where we do not have complete control over who participates in the intervention, which is the case in almost all field experiments. The framework developed by Angrist and Imbens has been widely adopted by researchers who work with observational data. By clarifying the assumptions necessary to establish a causal relationship, their framework has also increased the transparency – and thus credibility – of empirical research.

The 2021 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded with one half to David Card “for his empirical contributions to labour economics” and the other half jointly to Joshua D. Angrist and Guido W. Imbens “for their methodological contributions to the analysis of causal relationships.”

Learn more:
Press release: https://bit.ly/3hC6yn4
Popular information: https://bit.ly/3nAq1bH
Advanced information: https://bit.ly/3EnfuXk Re: 2021 Noble Peace Prize In Economic Sciences Has Been Awarded To Joshua D. Angrist And Guido W. Imbens For Their Methodological Contributions To The Analysis Of Causal Relationships
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Franklin Amadike Franklin Amadike Oct 11, 2021
Join us in congratulating our new economic sciences laureate Joshua Angrist.

Here he is checking out the news of his prize on nobelprize.org - stay tuned for our exclusive interview with him coming up!

#NobelPrize Re: 2021 Noble Peace Prize In Economic Sciences Has Been Awarded To Joshua D. Angrist And Guido W. Imbens For Their Methodological Contributions To The Analysis Of Causal Relationships
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Franklin Amadike Franklin Amadike Oct 11, 2021
Say hello to one happy family!

New economic sciences laureate Guido Imbens (centre) celebrates the news with his family in their garden early this morning.

#NobelPrize Re: 2021 Noble Peace Prize In Economic Sciences Has Been Awarded To Joshua D. Angrist And Guido W. Imbens For Their Methodological Contributions To The Analysis Of Causal Relationships
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Franklin Amadike Franklin Amadike Oct 11, 2021
Good morning to 2021 economic sciences laureate David Card!

Card’s wife Cynthia Gessele snapped this photo of him speaking to Nobel Prize’s Adam Smith (which he suspected might be a made-up name) right after he had heard the news.

Listen to our interview, coming soon.

#NobelPrize Re: 2021 Noble Peace Prize In Economic Sciences Has Been Awarded To Joshua D. Angrist And Guido W. Imbens For Their Methodological Contributions To The Analysis Of Causal Relationships
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Franklin Amadike Franklin Amadike Oct 11, 2021
How can we use a natural experiment – situations arising in real life that resemble randomised experiments – to examine whether additional years of education affect future income?

2021 economic sciences laureate Joshua Angrist and his colleague Alan Krueger (now deceased) showed how this could be done in a landmark article. In the US, children can leave school when they turn 16 or 17, depending on the state where they go to school. Because all children who are born in a particular calendar year start school on the same date, children who are born early in the year can leave school sooner than children born later in the year. When Angrist and Krueger compared people born in the first and fourth quarters of the year, they saw that the first group had, on average, spent less time in education. People born in the first quarter also had lower incomes than those born in the fourth quarter. As adults they thus had both less education and lower incomes than those born late in the year.

Because chance decides exactly when a person is born, Angrist and Krueger were able to use this natural experiment to establish a causal relationship showing that more education leads to higher earnings: the effect of an additional year of education on income was nine per cent. It was surprising that this effect was stronger than the association between education and income, which amounted to seven per cent. If ambitious and intelligent people have both high levels of education and high incomes (regardless of education) the result should have been the opposite; the correlation should have been stronger than the causal relationship.

The 2021 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded with one half to David Card “for his empirical contributions to labour economics” and the other half jointly to Joshua D. Angrist and Guido W. Imbens “for their methodological contributions to the analysis of causal relationships.”

Learn more:
Press release: https://bit.ly/3hC6yn4
Popular information: https://bit.ly/3nAq1bH
Advanced information: https://bit.ly/3EnfuXk Re: 2021 Noble Peace Prize In Economic Sciences Has Been Awarded To Joshua D. Angrist And Guido W. Imbens For Their Methodological Contributions To The Analysis Of Causal Relationships
..
Franklin Amadike Franklin Amadike Oct 11, 2021
If we are to make good decisions, we must understand the consequences of our choices. This applies to individuals as well as public policy makers: young people who are making educational choices want to know how these affect their future income; politicians considering a range of reforms want to know how these affect employment and income distribution, for example. However, answering broad questions about cause and effect is not easy, because we will never know what would have happened if we had made a different choice.

One way of establishing causality is to use randomised experiments, where researchers allocate individuals to treatment groups by a random draw. This method is used to investigate the efficacy of new medicines, among other things, but is not suitable for investigating many societal issues – for example, we cannot have a randomised experiment determining who gets to attend upper-secondary school and who does not.

Despite these challenges, the 2021 economic sciences laureates have demonstrated that many of society’s big questions can be answered. Their solution is to use natural experiments – situations arising in real life that resemble randomised experiments. These natural experiments may be due to natural random variations, institutional rules or policy changes.

This year’s laureates – David Card, Joshua Angrist and Guido Imbens – have shown that natural experiments can be used to answer central questions for society, such as how minimum wages and immigration affect the labour market. They have also clarified exactly which conclusions about cause and effect can be drawn using this research approach. Together, they have revolutionised empirical research in the economic sciences.

Learn more:
Press release: https://bit.ly/3hC6yn4
Popular information: https://bit.ly/3nAq1bH
Advanced information: https://bit.ly/3EnfuXk Re: 2021 Noble Peace Prize In Economic Sciences Has Been Awarded To Joshua D. Angrist And Guido W. Imbens For Their Methodological Contributions To The Analysis Of Causal Relationships
..

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