Marc F. Bellemare Posts

It has been a while since I blogged, so I thought it would be a good idea to share this new working paper of mine.

A few years ago I was asked to pitch ideas to the editors of the Annual Review of Resource Economics (ARRE)–in case you are not familiar with the Annual Reviews, they have done a fine job of competing with the Elsevier Handbooks, especially since they feature new articles every year.

One of the ideas that I pitched, and which the editors liked enough to ask me to submit to them, was for a review of the literature on price risk–that is, unexpected departures of a price from its expected level, also known as price volatility or price uncertainty.

This is something I have done a bunch of work on, from estimating the welfare impacts of price risk in a sample of agricultural households, to looking at whether food price volatility caused food riots, to discussing the potential of experimental and behavioral economics to study price risk, to estimating the response of producers to output price risk in the lab and in the field, and to looking at whether participation in agricultural value chains can help producers insure against price risk.

Given that, and given that I think there is still a lot of work to be done on the topic, I thought it was time for a perspective of the literature, and so I teamed up with my PhD student Chris Boyd Leon, who is writing her dissertation on issues related to price risk.

Here is the paper we submitted to the ARRE, and here is its abstract:

Much of neoclassical economics is concerned with prices—more specifically with relative prices. Similarly, economists have studied behavior in the face of risk and uncertainty for at least a century, and risk and uncertainty are without a doubt a feature of economic life. It is thus puzzling that price risk—that is, price volatility, or unexpected departures from a mean price level—has received so little attention. In this review, we discuss the microeconomics of price risk. We begin by reviewing the theoretical literature, a great deal of which is concerned with the effects of unstable agricultural prices on the welfare of producers, consumers, and agricultural households. We then discuss the empirical literature on the effects of price risk on economic agents. We emphasize policy responses to agricultural price risk throughout, discussing price stabilization policies from both a theoretical as well as an empirical perspective. Perhaps most importantly, we provide several suggestions for future research in the area of price risk given increasing risk on world agricultural markets due to both policy uncertainty and climate change.

Earlier this year I wrote two posts about Judea Pearl’s front-door criterion, and how to use it in a regression context (see here and here).

After writing those posts and seeing a few Twitter exchanges on the topic, I realized that a formal guide explaining how to use the front-door criterion in practice might be useful, and discussed with my PhD student Jeff Bloem–who is on the market this year; check out his CV here and consider hiring him–the possibility of working on such a paper together.

In this new working paper titled “The Paper of How”—an obvious play on dad joke about the title of Judea Pearl’s The Book of Why—we present just such a guide. More interestingly, however, we also (i) present three empirical illustrations of the front-door criterion, and (ii) explore what happens when the assumptions underlying the front-door criterion fail to hold.

Here is the abstract of this new paper, on which we welcome your comments:

Empirical social science nowadays consists largely of attempts at answering questions of the form “Does X cause Y?” As a result, social scientists rely on a number of empirical techniques aimed at disentangling causal relationships from mere correlations. One such technique is Judea Pearl’s (1995, 2000) front-door criterion, which relies for identification on the presence of a single, strictly exogenous mechanism on the causal path between the treatment and outcome. Social scientists in general–and economists in particular–have been resistant to the idea of adding the front-door criterion to the standard empirical toolkit, largely due to the difficulty posed by finding the required mechanism. To help overcome that resistance, we first explain how to use the front-door criterion in a regression context. We then present three empirical illustrations of the front-door criterion. Finally, and most importantly, we look at what happens when some of the assumptions underpinning the front-door criterion are violated.

Last week, the Agricultural and Applied Economics Association (AAEA)–my professional home–held its 2019 annual meeting in Atlanta, GA. In this post, I wanted to discuss some of my highlights from the meeting.

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Though the meeting was held from July 21 to 23, I arrived in Atlanta on the morning of the 19th to attend the biannual meeting of the executive board of the AAEA, to which I was elected last year. Here are the important things that came out of the board meeting:

• On the journal’s front, the editors of both the American Journal of Agricultural Economics (AJAE) and Applied Economic Perspectives and Policy (AEPP) had good things to report. Among other things, both journals’ impact factors went up in 2018. Both journals will also transition from being published by Oxford University Press to being published by Wiley in the next few months, and the transition is going well.
• Applied Economics Teaching Resources (AETR), the AAEA’s new journal dedicated to teaching, is off to a wonderful start. As another board member put it, editor Jason Bergtold went from 0 to 60 mph in record time. Here is vol. 1, no. 1 of the journal.
• A new journal focused on agricultural and food business will be proposed to Wiley, since this is a space which the AAEA does not currently occupy, and a sizable proportion of the membership works in that area.
• The AAEA will hold an early-career mentoring workshop focusing on research sometime this academic year.
• The Committee on Women in Agricultural Economics (CWAE) and the Committee on the Opportunities and Status of Blacks in Agricultural Economics (COSBAE) will both send out a survey to the membership on issues of concern to their members.
• The AAEA’s new anti-harassment policy and code of conduct are now in effect.
• On the financial front, changes may be coming to the funding model for publishing. Submission fees were discussed, as was the possibility of bringing back page charges for published articles.
• Should you be interested in helping the AAEA Trust grow, there are many opportunities. Among other things, the AAEA has appreciation clubs, which are created to celebrate the contribution of specific individuals to the association. If that is something you are interested in doing, you should get in touch with the business office of the AAEA.
• The AAEA will be working on a new strategic plan over the next year.
• The 2020 annual meeting will be held in Kansas City, and we hope for a big turnout.

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As outgoing chair of the Econometrics section of the AAEA, I had also organized two sessions for that section. The first was titled “The Front-Door Criterion in Theory and in Practice,” and it featured a one-hour talk with Emory University’s Adam Glynn, who wrote two important papers using the front-door criterion (one in AJPS 2017, one in JASA 2018). The second was titled “How Should Econometrics Be Taught?,” and it featured a dialogue between Dave Giles and me, as we respectively argued against and for a cookbook approach to teaching econometrics. Ultimately, there was a lot more agreement than disagreement. Here is Dave’s post on the topic, which also has a link to his slides. (I unfortunately did not have slides, and spoke from notes based on a previous post on the topic.)

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Although we do not officially start until January 1, Amy Ando and I spent a whole day with the remaining editors Terry Hurley and Tim Richards and outgoing editors Tim Beatty and Travis Lybbert of the American Journal of Agricultural Economics. This allowed us to get acquainted with how the AJAE works, and to receive training on the journal’s editorial system.

From what I can see after one week handling manuscripts for the AJAE (I’ve already handled four new submissions), the journal operates along many dimensions differently than what I am used to at Food Policy (e.g., the AJAE does not have an editorial assistant who assigns manuscripts to the relevant editor, and the AJAE’s associate editors do not handle manuscripts).

Speaking of Food Policy, my time as editor of that journal ends tonight at midnight. It has been an instructive, exhilarating, and frustrating (often all four in the span of 24 hours) four years. I’ll likely discuss in a separate post the insights I have gained as co-editor of Food Policy.

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Update: I forgot to mention it in my original post, but the meeting concluded with a two-day early career mentoring workshop organized by the University of Illinois Madhu Khanna, at which I talked in a session titled “Getting Published.” The workshop was very well attended by younger colleagues. The future of agricultural and applied economics is bright!