Experiments! Benjamin Graham

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1 Experiments! Benjamin Graham IR 211: Lecture 15 Benjamin Graham

2 Internal vs. External Validity Internal Validity: What was the effect of this particular treatment on these particular subjects? External Validity: About what population can we make a valid inference based on the results we observe?

the value of our independent variable of

3 Establishing the Counterfactual What would the world look like if we changed the value of our independent variable of interest, but held everything else constant? Introducing the planet Htrae! Independent variable of interest: Dummy variable for good or evil. We hold everything else constant, including super-hero powers.

4 Randomized Control Trials: The next best thing to a parallel universe We need things ceteris paribus. With randomization, treatment group is identical to the control group. Extraneous (omitted) variables have the same value in each group. The differences are random selection error. We calculate the size of the errors. No causation without manipulation Observational data vs. Experimental data Experiments have awesome internal validity Their external validity depends on sampling and context.

5 Experiments (AKA RCTs) True experiments have these three things: 1. At least two groups (treatment and control) Treatment group gets the drug, control group gets the sugar pill (the placebo) 2. Variation in the independent variable that precedes measurement of the dependent variable We give them the drug BEFORE we measure whether they got better 3. Random assignment between treatment and control (or between levels of treatment) This is how we know that the only difference between the two control groups is whether they got the treatment or not. If we really want to make good causal inference we also need to: Understand the causal mechanism Make sure the context of the experiment matches the context of the population we re making an inference about.

6 Random Sampling vs. Random Assignment Random Sampling: Makes sure our sample looks like a miniature version of our population All about external validity: the population you sample from is the population you can make inferences about. Random Assignment: Makes sure our control group looks just like our treatment group Think parallel universes: everything is the same in these two groups except for the treatment itself All about internal validity: Random assignment solves the extraneous variable problem.

7 Clicker Question Is this random assignment or random sampling? Treatment Group Whole Population Our Sample Control Group A. Random Sampling B. Random Assignment

8 Clicker Question Treatment Group Whole Population Our Sample Is this random assignment or random sampling? Control Group A. Random Sampling B. Random Assignment

9 Pretest and Posttest Pretest Treatment Group Treatment Posttest Pretest Control Group No Treatment Posttest

10 Pretest and Posttest Pretest Treatment Group Treatment Posttest Should these scores be the same or different? Pretest Control Group No Treatment Posttest

11 Pretest and Posttest Pretest Treatment Group Treatment Posttest If these scores are different, what does that tell us? Pretest Control Group No Treatment Posttest

12 An IPE Example Hypothesis: Signing a bilateral investment treaty increases bilateral flows of foreign direct investment. Selection: Lets use all the country-pairs in the world-- a census rather than a sample

13 Clicker Question Hypothesis: Signing a bilateral investment treaty increases bilateral flows of foreign direct investment. Selection: Lets use all the country-pairs in the world-- a census rather than a sample What is the null hypothesis? 1. Bilateral investment treaties have either no effect or a negative effect on bilateral FDI flows. 2. Bilateral FDI flows increase the likelihood of signing a bilateral investment treaty.

14 Clicker Question Hypothesis: Signing a bilateral investment treaty increases bilateral flows of foreign direct investment. Selection: Lets use all the country-pairs in the world-- a census rather than a sample What is our unit of analysis? A. The country B. The dyad (i.e. country pair) C. The world D. The individual

15 Clicker Question Hypothesis: Signing a bilateral investment treaty increases bilateral flows of foreign direct investment. Selection: Lets use all the dyads (country-pairs) in the world-- a census rather than a sample What is our treatment? 1. Bilateral flows of foreign direct investment 2. Having a bilateral investment treaty in place or not 3. Economic Growth 4. Regime Type 5. The country-pair

16 Clicker Question Hypothesis: Signing a bilateral investment treaty increases bilateral flows of foreign direct investment. Selection: Lets use all the dyads (country-pairs) in the world-- a census rather than a sample What is our dependent variable? 1. Bilateral flows of foreign direct investment 2. Having a bilateral investment treaty in place or not 3. Economic Growth 4. Regime Type 5. The country-pair

17 Clicker Question Hypothesis: Signing a bilateral investment treaty increases bilateral flows of foreign direct investment. Selection: Lets use all the dyads (country-pairs) in the world-- a census rather than a sample If we ran a true experiment, how would we decide who is in the treatment group and who is in the control group? 1. We could pick 10 rich countries and have them sign a treaty with 10 poor countries 2. Random Assignment: We would randomly assign country parents to either treatment or control. We would force the treatment country pairs to sign a bilateral investment treaty, and tell the control pairs that they can t sign a treaty. 3. Allow countries to sign treaties with whomever they like.

18 Not A Clicker Question Hypothesis: Signing a bilateral investment treaty increases bilateral flows of foreign direct investment. Selection: Lets use all the dyads (country-pairs) in the world-- a census rather than a sample

19 Clicker Question Hypothesis: Signing a bilateral investment treaty increases bilateral flows of foreign direct investment. Selection: Lets use all the country-pairs in the world-- a census rather than a sample 1.If we use random assignment, and then we give a pretest, should the scores be the same between the treatment and control groups? 1. Yes 2. No

20 Another Example Hypothesis: Signing a bilateral investment treaty increases bilateral flows of foreign direct investment. Selection: Lets use all the country-pairs in the world-- a census rather than a sample 1.When we give the posttest, what kind of results would lead me to fail to reject the null hypothesis? 1. More FDI flows in treatment pairs 2. Less FDI flows in treatment pairs 3. The same FDI flows in both treatment and control pairs 4. 1&3 5. 2&3

21 Dealing with context How much is our lab like the real world? What kind of validity does this effect?

Math 361. Day 8 Binomial Random Variables pages 27 and 28 Inv Do you have ESP? Inv. 1.3 Tim or Bob?

Math 361. Day 8 Binomial Random Variables pages 27 and 28 Inv Do you have ESP? Inv. 1.3 Tim or Bob? Math 361 Day 8 Binomial Random Variables pages 27 and 28 Inv. 1.2 - Do you have ESP? Inv. 1.3 Tim or Bob? Inv. 1.1: Friend or Foe Review Is a particular study result consistent with the null model? Learning