Never mind what it is about, one of Paul Krugman’s recent posts includes this paragraph on instrumental variables (IV):
Instrumental variables is a statistical technique that you use to avoid having your results contaminated by reverse causation — say, if stimulus funds were directed to states with especially severe unemployment problems, you might find a spurious negative correlation between stimulus and unemployment. What you need to get around this is some variable that is correlated with stimulus but not affected by the job changes; in effect, you use this other variable to create a predicted stimulus level, then look at how employment is affected by the predicted level, not the actual level. If I’ve just lost you, never mind.
If, by virtue of my blogging on IV, a single reader isn’t lost who might otherwise be, I’ll be very happy. If that reader is you, maybe you’d be so kind to tell me in the comments. It’d make my day.
While I’m asking, if any readers use this blog as part of college/university course curriculum or otherwise wish to express their appreciation, that will help. No, I’m not having a bad day. But you can make it a very good one.
