Henry L. Bryant

Disproving Causal Relationships Using Observational Data

Economic theory is replete with causal hypotheses that are scarcely tested because economists are generally constrained to work with observational data. We describe a method for testing a hypothesis that one observed random variable causes another. Contingent on a sufficiently strong correspondence between the two variables, an appropriately related third variable can be employed for the test. The logic of the procedure naturally suggests strong and weak grounds for rejecting the causal hypothesis. Monte Carlo results suggest that weakly grounded rejections are unreliable for small samples, but reasonably reliable for large samples. Strongly grounded rejections are highly reliable, even for small samples.

Long-run effects of falling cellulosic ethanol production costs on the US agricultural economy

Renewable energy production has been expanding at a rapid pace. New advances in cellulosic ethanol technologies have the potential to displace the use of petroleum as a transportation fuel, and could have significant effects on both the agricultural economy and the environment. In this letter, the effects of falling cellulosic ethanol production costs on the mix of ethanol feedstocks employed and on the US agricultural economy are examined. Results indicate that, as expected, cellulosic ethanol production increases by a substantial amount as conversion technology improves. Corn production increases initially following the introduction of cellulosic technology, because producers enjoy new revenue from sales of corn stover. After cellulosic ethanol production becomes substantially cheaper, however, acres are shifted from corn production to all other agricultural commodities. Essentially, this new technology could facilitate the exploitation of a previously under-employed resource (corn stover), resulting in an improvement in overall welfare. In the most optimistic scenario considered, 68% of US ethanol is derived from cellulosic sources, coarse grain production is reduced by about 2%, and the prices of all food commodities are reduced modestly.