Although instrumental variable regression was invented as a solution to the problem of estimating supply and demand curves, our take on instrumental variables corresponds to the way instrumental variable regression is most often used now: as a solution to the problem of selection bias. The more gnarly statistical proofs seem to be left to their other more advanced book Mostly Harmless Econometrics.

ust ust over a quarter century ago, Edward Leamer (1983) reflected on the state of empirical work in economics. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer. This book is everything for undergraduates that Mostly Harmless Econometrics is for graduate students, and more. When private banks teeter, and depositors take their money and run, should central banks step in to save them?Gary Chamberlain, Harvard University "Modern econometrics is more than just a set of statistical tools--causal inference in the social sciences requires a careful, inquisitive mindset. Wielding econometric tools with skill and confidence, Mastering ‘Metrics uses data and statistics to illuminate the path from cause to effect. The math presented is clear and approachable even for novice empiricists, but readers should be forewarned that these topics involve subtle issues requiring careful thought. While very readable and conversational in tone, it is still rather terse in some sections as if you're expected to already have seen most of the material here on a previous introductory course.

Gary King, Harvard University "This valuable book connects the dots between mathematical formulas, statistical methods, and real-world policy analysis.The methods that are covered are extremely important in social science and so having an idea of what they do and why we use them is helpful. This section helps the reader better appreciate the critical process of properly formulating tests before commencing analysis.

Masters of 'Metrics: Galton and Yule 79 Appendix: Regression Theory 82 3 Instrumental Variables 98 3.These and many other issues which are explored in this book actually bring out a glamorous aspect of the toils economists go through in examining an issue with the precision, care and concern - especially because policies are a result of these studies! Showing how masters from around the world use MM to light their students’ way on the path from cause to effect. Here again, the authors focus on thinking through the formulation of tests and when to use these techniques.