Why Matthew E. Kahn is optimistic about microeconomics

1.   Applied micro researchers have access to more data than ever and have access to more computing power and more easy to use and sophisticated econometric methods than ever before.   Improved canned software in Stata allows applied researchers to relax many of the statistical assumptions that researchers made in previous years.   Such “robust” estimates allow us to march towards learning the truth.

2.   Due to “natural experiments”, discontinuities, and explicit randomizations, we now have more variation in “cause variables” (the X’s) than ever before.

3.  The advent of Google and the rise of Economics in Europe and outside of Western nations means that the current set of applied micro researchers are aware in “real time” about what findings are emerging in the top 5 journals and NBER and IZA and CEPR working papers.    Now that there are so many applied micro economists working around the world, this competition fosters innovation and progress.

4.  Replication is rising as an important piece of our advance as a “science”.

5.  Leading firms such as Amazon highly value quantitative training.  Undergraduates are aware of this and they are investing in the math/computer programming and economics and stats training to have the option to pursue this.  Some of these young people will opt into doing a PHD in economics and applied micro grows stronger due to this influx of talent.

6.  Thanks to scholars such as Raj Chetty, the power of using administrative data (such as IRS tax data) are now more clearly seen all over the world. I expect that more government officials who “know that they do not know” the answers for unlocking economic development will increasingly partner with the J-PAL and other economists to help them to experiment and learn.  This is Hayek as applied microeconomist at its best.

The rest of his post lists four concerns.


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