Philip G. Wright, directed acyclic graphs, and instrumental variables
Abstract
Wright (1928) deals with demand and supply of oils and butter. In Appendix B of this book, Philip Wright made several fundamental contributions to causal inference. He introduced a structural equation model of supply and demand, established the identification of supply and demand elasticities via the method of moments and directed acyclical graphs, developed empirical methods for estimating demand elasticities using weather conditions as instruments, and proposed methods for counterfactual analysis of the welfare effect of imposing tariffs and taxes. Moreover, he took all of these methods to data. These ideas were far ahead, and much more profound than, any contemporary theoretical and empirical developments on causal inference in statistics or econometrics. This editorial aims to present P. Wright's work in a more modern framework, in a lecture note format that can be useful for teaching and linking to contemporary research.
Cite
@article{arxiv.2501.16395,
title = {Philip G. Wright, directed acyclic graphs, and instrumental variables},
author = {Jaap H. Abbring and Victor Chernozhukov and Iván Fernández-Val},
journal= {arXiv preprint arXiv:2501.16395},
year = {2025}
}
Comments
21 pages, 5 figures, this version fixes a typo in the previous version