Econometric methods and Reichenbach's principle

Abstract

Reichenbach's 'principle of the common cause' is a foundational assumption of some important recent contributions to quantitative social science methodology but no similar principle appears in econometrics. Reiss (2005) has argued that the principle is necessary for instrumental variables methods in econometrics, and Pearl (2009) builds a framework using it that he proposes as a means of resolving an important methodological dispute among econometricians. We aim to show, through analysis of the main problem instrumental variables methods are used to resolve, that the relationship of the principle to econometric methods is more nuanced than implied by previous work, but nevertheless may make a valuable contribution to the coherence and validity of existing methods.