RCTs and the Status Quo: The Special Relationship

In economics, Randomized Controlled Trials (RCTs) now stand at the pinnacle of the methodological hierarchy.  “Natural experiments” are a distant second.  Work based on old-fashioned observational data is actually hard to publish anywhere prestigious.  For many scholars, RCTs aren’t just the gold standard of research.  Nothing else is even fungible.  This is the Age of the Randomista.

Which raises a serious problem: How can researchers address questions where no RCT is feasible?  To do an RCT on national monetary policy, for example, you would have to randomly assign monetary policies to a bunch of countries.  Not gonna happen.  To do an RCT on national disincentive effects of welfare, you would have to randomly assign welfare policies to a bunch of countries.  Again, not gonna happen. 

Sure, you could run some RCT laboratory experiments on monetary policy.  But why assume that some silly games in a lab carry over into the real world?  Similarly, you could run a pilot welfare program for a single city and measure the effects.  But perhaps a lot of the labor supply response comes from the society-wide erosion of stigma against idleness.  If so, your pilot program will fail to detect it. 

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