Why We Can Never Fully Prove Our Econometric Assumptions

Every empirical economist faces a fundamental challenge: convincing ourselves and others that our results are real, not artifacts of methodology. But no matter how sophisticated our methods, credibility ultimately rests on untestable assumptions! In this video, we explore how validation differs between experimental and structural approaches in economics, and why balance checks and model fit assessments are really two sides of the same coin. Both build confidence in assumptions we can never fully prove. Key Topics Covered: The "credibility revolution" in empirical economics Validating research designs vs. validating models Balance checks in randomized experiments Parallel trends in difference-in-differences estimation Placebo tests and their limitations Model fit and untargeted moments in structural estimation The overfitting problem and generalization Why all empirical work requires leaps of faith Main Takeaway: Whether you're doing balance checks or model fit validation, you're not actually providing evidence of your maintained assumptions—but you are building confidence in them. The credibility revolution didn't solve this fundamental problem, but it did make us more honest about it. Relevant Concepts: Identification strategies Internal validity vs. external validity Randomized controlled trials (RCTs) Difference-in-differences (DiD) Structural estimation Overfitting vs. generalization Out-of-sample prediction Perfect for economics students, researchers, and anyone interested in understanding the foundations and limitations of empirical research methods. #Economics #Econometrics #ResearchMethods #CausalInference #DataScience #AcademicResearch #Econometrics101 Tyler Ransom is an Associate Professor of Economics at the University of Oklahoma. Subscribe for more videos on data science, econometrics, and research methods! Editing credit: @neiljohnmanllios3064 #econometrics #empiricaleconomics #credibilityrevolution #researchmethods #causalinference #identificationstrategy #randomizedexperiments #differenceindifferences #structuralestimation #balancechecks #modelfit #paralleltrends #placebotests #researchdesign #economicsphd #datascience #statistics #overfitting #untargetedmoments #economicseducation