How the (Econometric) Sausage is Made

 I have an addiction. Perhaps more than one. But one for sure. And, so, when this image made its rounds this week on Twitter with everyone adding their favorite econometric caption to what this person is winking about, I could not resist. I tried. I failed. I relented. I tweeted what I think she is saying: "No measurement error." Low-hanging fruit, I know. Still, I feel compelled to shout "measurement error" until researchers listen more.  Then, as only an enabler can do, my addiction was fed when  Carlos Carpio Ochoa tweeted a response asking for a blog post on addressing measurement error and endogeneity in a binary covariate, such as treatment assignment. Of course, I do not possess the will power to resist. So, here we are. In a very early post  I discuss the difficulties created with measurement error in an otherwise exogenous binary covariate. Simulations show how an apparently valid instrument does not yield consistent estimates of the true coefficient in