[gov3009-l] Applied Stats - 3/4 - Maximilian Kasy

Hi everyone! This week at the Applied Statistics Workshop we will be welcoming Maximilian Kasy, an Assistant Professor of Economics at Harvard University. He will be presenting work entitled *Why experimenters should not randomize, and what they should do instead*. Please find the abstract below and on the website <http://projects.iq.harvard.edu/applied.stats.workshop-gov3009/presentations/maximilian-kasy-harvard> . As usual, we will meet in CGIS Knafel Room 354 and lunch will be provided. See you all there! -- Anton Title: Why experimenters should not randomize, and what they should do instead Abstract: This paper discusses experimental design for the case that (i) we are given a distribution of covariates from a pre-selected random sample, and (ii) we are interested in the average treatment effect (ATE) of some binary treatment. We show that in general there is a unique optimal non-random treatment assignment if there are continuous covariates. We argue that experimenters should choose this assignment. The optimal assignment minimizes the risk (e.g., expected squared error) of treatment effects estimators. We provide explicit expressions for the risk, and discuss algorithms which minimize it. The objective of controlled trials is to have treatment groups which are similar a priori (balanced), so we can “compare apples with apples.” The expressions for risk derived in this paper provide an operationalization of the notion of balance. The intuition for our non-randomization result is similar to the reasons for not using randomized estimators - adding noise can never decrease risk. The formal setup we consider is decision-theoretic and nonparametric. In simulations and an application to project STAR we find that optimal designs have mean squared errors of up to 20% less than randomized designs and up to 14% less than stratified designs.