Thread by @yudapearl

1/ Continuing our exploration of "Reduced Form Equations" (RFE) and what they mean to economists, let me address some hard questions that CI analysts frequently ask. Q1: Isn't a RFE just a regression equation? A1. Absolutely Not! A RFE carries causal information, a regression

2/ equation does not. Q2: Isn't a RFE just a structural equation? A1. No! Although a RFE carries causal information (much like a structural equation) the RFE may not appear as such in the structural model; it is derived from many such equations though functional composition.

3/ (The output-instrument in the IV setting is a typical example). Q3: One may derive many equations from a structural model; what makes a RFE so special to deserve its own name. A3: It is exceptional because it comes with a license of identification by OLS. This is not usually

4/ the case for other derivable equations, say those relating two endogenous variables. Q4: But some of those other equations ARE identified by OLS; why haven't they been baptized with a name? A4:Because traditionally, economists did not have an easy way of telling which equation

5/5 enjoys identification by OLS and which does not. Now they do, so it is quite likely that next generation econ. texts will introduce new names. For example, every structural equation identifiable by OLS
should be so recognized. #Bookofwhy @PHuenermund @causalinf @analisereal