A random shock is not random assignment
Section snippets
The issue
With the credibility revolution, empirical economics has changed fundamentally (Leamer, 1983, Manski, 1995, Angrist and Pischke, 2010). No good publication takes correlation for causation. It seems the enthusiasm for instrumental variables has also somewhat cooled down. Too often their exogeneity is questionable, or they are weak (Bound et al., 1995). A way out are random shocks. They create a “natural experiment” (Meyer, 1995). Researchers have warned that they are not true experiments if the
Design
In the experiment, participants are randomly assigned to groups of two. Each participant is endowed with 20 tokens. Each decides in the active role whether she wants to take any of the passive participant’s tokens. Afterwards, (using the strategy method) in every period the active role is randomly assigned. Participants know they can lose tokens if are found out to have taken tokens from their counterpart. The experiment is framed neutrally and speaks of “taking”, “checking”, tokens that are
Results
For welfare, the sustainable deterrent effect is most relevant. In the experiment, one way to test for it is comparing choices in the first round. In this round I neither find a treatment effect on the frequency of stealing,3 nor on the stolen amount. Alternatively one may compare choices in the entire first phase (of 8 periods). This informs about the deterrent effect on would-be criminals with growing experience. In Table 1,
Conclusions
Mimicking a natural experiment in the lab demonstrates that a random shock is not a panacea. One identifies reactions to a change in circumstances. This change need not be a good proxy for the presence or the absence of the circumstance in question. Essentially the random shock is just an instrument. In the example (with the first change) one would conclude that there is a certainty effect on the frequency of stealing, but a severity effect on the stolen amount. Yet there is no effect at all on
Acknowledgments
Helpful comments by David Jäger, Jonathan Klick, Adrian Hillenbrand and Anna Kochanova on an earlier version, excellent research assistance by Rafael Schwalb, and programming of the experiment in zTree by Anastasia Niechaieva are gratefully acknowledged. The experiment has been funded from the regular budget of the Bonn Max Planck Institute. The Hamburg Econ Lab has kindly run the experiment.
References (18)
- et al.
hroot
Eur. Econ. Rev.
(2014) Self-serving cheap talk
Games Econom. Behav.
(2000)- et al.
Measuring personality in one minute or less
J. Res. Pers.
(2007) - et al.
The credibility revolution in empirical economics
J. Econ. Perspect.
(2010) - et al.
The impact of certainty and severity of punishment on levels of crime in American states
J. Crim. Law Criminol.
(1973) - et al.
Problems with instrumental variables estimation when the correlation between the instruments and the endogenous explanatory variable is weak
J. Amer. Statist. Assoc.
(1995) - et al.
dhreg, xtdhreg, bootdhreg. Programs to implement double hurdle regression
Stata J.
(2014) - et al.
Who is afraid of the stick?
Rev. Behav. Econ.
(2015) z-Tree
Exp. Econ.
(2007)
Cited by (10)
Enhanced penalties for carrying firearms illegally and their effects on crime
2019, Economic Analysis and PolicyCitation Excerpt :Some researchers conclude that increasing punishment does not necessarily reduce criminal activities (Trumbull, 1989; Jarrell and Howsen, 1990; Decker and Kohfeld, 1990; kim et al., 1993; Doob and Webster, 2003; Robinson and Darley, 2004). Others suggest that punishment is as important as other crime-preventing factors (conviction, enforcement, arrest, opportunity cost of crime, etc.) and does reduce the crime rate (Kessler and Levitt, 1999; Mendes and McDonald, 2001; Helland and Tabarrok, 2007; Durlauf and Nagin, 2011; May, 2014; Engel and Nagin, 2015; Engel, 2016). In this paper, we use a well-publicized and targeted sentencing enhancement in the state of New York to identify its net effect on crime.
Challenges in the Interdisciplinary Use of Comparative Law
2021, American Journal of Comparative Law