Yesterday Jeremy pointed out that while the 2021 economics Nobelists have reached various conclusions in their study of labor economics, the prize was really awarded to the methods they developed and used.
I find the best explanation of the value of these methods to be this 2010 article by Angrist and Pischke in the Journal of Economic Perspectives: The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics
Like Jeremy, they think that empirical economic research (that is, research using econometrics) was most quite bad up to the 1980’s; as Ed Leamer put it in his paper “Let’s take the CON out of Econometrics”:
This is a sad and decidedly unscientific state of affairs we find ourselves in. Hardly anyone takes data analyses seriously. Or perhaps more accurately, hardly anyone takes anyone else’s data analyses seriously.
Angrist and Pischke argue that the field is in much better shape today:
empirical researchers in economics have increasingly looked to the ideal of a randomized experiment to justify causal inference. In applied micro fields such as development, education, environmental economics, health, labor, and public finance, researchers seek real experiments where feasible, and useful natural experiments if real experiments seem (at least for a time) infeasible. In either case, a hallmark of contemporary applied microeconometrics is a conceptual framework that highlights specific sources of variation. These studies can be said to be design based in that they give the research design underlying any sort of study the attention it would command in a real experiment.
The econometric methods that feature most prominently in quasi-experimental studies are instrumental variables, regression discontinuity methods, and differences-in-differences-style policy analysis
Our field still has big problems: the replication crisis looms, and the credibility revolution’s focus on the experimental ideal leads economists to avoid important questions that can’t be answered by natural experiments. But I do think that the average empirical economics paper today is much more credible than one from 1980, and that the 3 Nobelists are part of the reason why, so cheers to them.