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Unformatted text preview: Lecture Note #17: Free Range Freakonomics David Autor 14.03, Microeconomic Theory and Public Policy, Fall 2005 1 Introduction All of the papers that we have discussed this semester have been directly related to the theoreti- cal topics raised in class. But not all of economic research is about the testing (or development) of economic theory. Much important economic research is devoted to testing cause and e f ect relationships in the social sciences. As we have emphasized, understanding cause-and-e f ect is central to science and yet particularly di cult in the social sciences because: 1) the questions we want to answer about people and markets are often di cult to move into a laboratory setting; 2) making experimentation all the more di cult, we can never assume that unit homogeneity is satis f ed for human subjects, and we can only rarely assume that causal transience holds; 3) many questions wed like to answer experimentally would not be ethically feasible using human subjects (and although perfectly okay with bacteria, the results might not generalize). And so, the testing of cause and e f ect has developed into a high art-form in economics. In the last two lectures, we will discuss three papers that address cause and e f ect questions. Two are studies that exploit natural (or quasi) experiments to isolate causal e f ects. One paper assesses the e f ect of pollution on infant health. A second analyzes the economic conditions that lead people to engage in civil wars. A third paper is in a di f erent vein. Rather than analyzing a natural experiment, it uses economic theory to interpret the operation of the commercial sex market in equilibrium. This analysis has important implications for public policies intended to reduce HIV transmission. Following up on our analysis of externalities, we will begin with the air pollution paper. 1 2 T h e e f ect of air pollution on health: Evidence from a recession It is widely accepted that air pollution is harmful to human health. But it is di cult to evaluate just how harmful it is at conventional, ambient levels. We know that breathing auto exhaust fumes in a closed garage is lethal. We dont know how unhealthy it is for a person to breath city air during a tra c jam. The reason that we lack information on these typical cases is that we have no data from controlled experiments in which randomly assigned subjects are exposed to di f erent levels of pollution (followed by long-term health follow-ups). An additional problem for measuring the e f ect of exposure to environmental toxins on health is the issue that epidemiologists call harvestingif exposure causes the premature death of the least healthy members of the population, we may see improvements in the average health of those still living, leading to a spurious inference that pollution improves health....
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This note was uploaded on 04/11/2008 for the course ECON 14.01 taught by Professor Pindyck during the Spring '08 term at MIT.
- Spring '08