Wednesday, April 2, 2014

Causal inference is hard

From Slate we have this interesting debate about what ended China's famines:

Scholars continue to argue over how much of China’s agricultural turnaround was due to the capitalist incentive structure, how much resulted from earlier investments, and how much was a trick of the weather. Some say the end of collective farming accounted for nearly three-quarters of the improvements in productivity, while others say it was responsible for no more than one-third.

It’s fine to treat China’s food revolution as a fairy tale. The changes were so dramatic that it’s hard not to. But let’s make sure we get the moral of this story correct. Changing the incentives isn’t a magic trick that can turn any lagging economy into a global juggernaut. Investment in infrastructure, research and development, and putting money into the pockets of workers work wonders as well. And a little sunshine doesn’t hurt, either.
So we basically have five possible explanations, all of which could explain some or all of this change:
  1. Ending collective farming (capitalist reform)
  2. Infrastructure development
  3. Government subsidies to farmers (i.e. financial support to poor people)
  4. Research on improved crops
  5. Unexpected good weather

What makes this tough is that many of these explanations suggest different policy conclusions when you try and apply these lessons to other contexts.  For example, if the dominant cause was improved infrastructure then maybe we should tax more in order invest in infrastructure projects.  If it was giving more money to poor people then maybe the minimum wage is where we should put our focus.  If it was the weather (luck) then maybe these results can't be generalized. 

Since complex phenomenon, like improved food supply, like have many causes, it can be hard to decide which ones to focus on.  After all, some of these factors could have been counter-productive, but the next causal effect could be positive. 

But it seems pretty obvious why experiments are not sensible here.  These sorts of questions are, and I think always will be, very hard to answer. 

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