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I've merely taken a few economic courses in college -not an economics major-, so my knowledge regarding the field is limited. Lately I've been interested in learning about the economic impact of government policies, particularly in the USA and as easy as it is to find data on median household income, gdp per capita, poverty rates, dow jones index and so on, I'm unable to find much information on how the government policies have affected those metrics (beyond simple correlations).

I'm simply wondering how one could investigate causation regarding these metrics.

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You might be inspired by Joshua Angrist (MIT) who talks in this podcast about the craft of econometrics--how to use economic thinking and statistical methods to make sense of data and uncover causation.

Using natural experiments is a good way to establish causation. A natural experiment is an empirical setting in which individuals are exposed to the experimental and control conditions that are determined by nature or by other factors outside the control of the investigators. A growing literature relies on natural experiments to establish causal effects in macroeconomics (see Nicola Fuchs-Schuendeln and Hassan, 2016).

For those trying to find such natural experiments as a basis for their own research, Angrist says:

One thing I learned is that empiricists should work on stuff that's nearby. Then you can have some visibility into what's unique and try to get on to projects that other people can't do. This is particularly true for empiricists who are working outside the United States. There's a temptation to just mimic whatever the Americans and British are doing. I think a better strategy is to say, "Well, what's special and interesting about where I am?"

Angrist has also written accessible and relevant papers on data and causation:

  • Angrist, Joshua D., and Jörn-Steffen Pischke. 2010. "The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics." Journal of Economic Perspectives, 24 (2): 3-30.
  • Angrist, Joshua, D., and Alan B. Krueger. 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments." Journal of Economic Perspectives, 15 (4): 69-85.
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  • $\begingroup$ Not clear why this answer has been downvoted. Please provide feedback to improve it. $\endgroup$ – emeryville Oct 20 '20 at 7:10
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    $\begingroup$ for me it is +1 because I think this post will be useful and that is my bar for upvoting, but if I may offer some feedback the answer looks little bit too Angrist centrist - don't get me wrong the guy is an genius when it comes to policy evaluations but reading this makes it look like he invented natural experiments. $\endgroup$ – 1muflon1 Oct 20 '20 at 9:46
  • $\begingroup$ @1muflon1 I see .. some people are angry with Angrist... I will update it $\endgroup$ – emeryville Oct 20 '20 at 10:03
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    $\begingroup$ I would not say angry (who could hate the guy) but the post reads almost like a love letter ^^ $\endgroup$ – 1muflon1 Oct 20 '20 at 10:05

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