Econometric Causality: The Central Role of Thought Experiments

Area of Science:

• Econometrics
• Causal Inference
• Economic Modeling

Background:

• The econometric causal model, developed by Frisch and Haavelmo, utilizes thought experiments.
• Current popular frameworks include the Neyman-Rubin causal model (potential outcomes) and Judea Pearl's Do-Calculus (DAGs).

Purpose of the Study:

• To compare the econometric causal model with the Neyman-Rubin causal model and Do-Calculus.
• To argue for the continued relevance and benefits of the econometric causal model in economic analysis.

Main Methods:

• Comparative analysis of causal inference frameworks.
• Illustration of the econometric framework's capabilities using economic models.

Main Results:

• The Neyman-Rubin model is based on statistical experiments, while Do-Calculus uses Directed Acyclic Graphs.
• Uncritical adoption of newer frameworks can lead economists to overlook the strengths of the econometric approach.

Conclusions:

• The econometric causal model offers substantial benefits for informative economic analyses.
• Economists should critically evaluate and integrate the econometric framework for robust causal inference.