Real Chaos, Today! Are Randomized Controlled Trials a good way to do economics?

Article by Maia Mindel: “A few weeks back, there was much social media drama about this a paper titled: “Social Media and Job Market Success: A Field Experiment on Twitter” (2024) by Jingyi Qiu, Yan Chen, Alain Cohn, and Alvin Roth (recipient of the 2012 Nobel Prize in Economics). The study posted job market papers by economics PhDs, and then assigned prominent economists (who had volunteered) to randomly promote half of them on their profiles(more detail on this paper in a bit).

The “drama” in question was generally: “it is immoral to throw dice around on the most important aspect of a young economist’s career”, versus “no it’s not”. This, of course, awakened interest in a broader subject: Randomized Controlled Trials, or RCTs.

R.C.T. T.O. G.O.

Let’s go back to the 1600s – bloodletting was a common way to cure diseases. Did it work? Well, doctor Joan Baptista van Helmont had an idea: randomly divvy up a few hundred invalids into two groups, one of which got bloodletting applied, and another one that didn’t.

While it’s not clear this experiment ever happened, it sets up the basic principle of the randomized control trial: the idea here is that, to study the effects of a treatment, (in a medical context, a medicine; in an economics context, a policy), a sample group is divided between two: the control group, which does not receive any treatment, and the treatment group, which does. The modern randomized controlled (or control) trial has three “legs”: it’s randomized because who’s in each group gets chosen at random, it’s controlled because there’s a group that doesn’t get the treatment to serve as a counterfactual, and it’s a trial because you’re not developing “at scale” just yet.

Why could it be important to randomly select people for economic studies? Well, you want the only difference, on average, between the two groups to be whether or not they get the treatment. Consider military service: it’s regularly trotted out that drafting kids would reduce crime rates. Is this true? Well, the average person who is exempted from the draft could be, systematically, different than the average person who isn’t – for example, people who volunteer could be from wealthier families who are more patriotic, or poorer families who need certain benefits; or they could have physical disabilities that impede their labor market participation, or wealthier university students who get a deferral. But because many countries use lotteries to allocate draftees versus non draftees, you can get a group of people who are randomly assigned to the draft, and who on average should be similar enough to each other. One study in particular, about Argentina’s mandatory military service in pretty much all of the 20th century, finds that being conscripted raises the crime rate relative to people who didn’t get drafted through the lottery. This doesn’t mean that soldiers have higher crime rates than non soldiers, because of selection issues – but it does provide pretty good evidence that getting drafted is not good for your non-criminal prospects…(More)”.