Potential Outcome and Directed Acyclic Graph Approaches to Causality: Relevance for Empirical Practice in Economics
In this essay I discuss potential outcome and graphical approaches to causality, and their relevance for empirical work in economics. I review some of the work on directed acyclic graphs, including the recent “The Book of Why,” ([Pearl and Mackenzie, 2018]). I also discuss the potential outcome framework developed by Rubin and coauthors, building on work by Neyman. I then discuss the relative merits of these approaches for empirical work in economics, focusing on the questions each answer well, and why much of the work in economics is closer in spirit to the potential outcome framework.
I am grateful for comments by Alberto Abadie, Jason Abaluck, Josh Angrist, Rebecca Diamond, Dean Eckles, Ernst Fehr, Avi Feller, Paul Goldsmith-Pinkham, Chuck Manski, Paul Milgrom, Evan Munro, Michael Pollmann, Jasjeet Sekhon, Korinayo Thompson, and Heidi Williams. They are not responsible for any of the views expressed here. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.