Research / BFI Working PaperFeb 28, 2022

Causality and Econometrics

James Heckman, Rodrigo Pinto

This paper examines the econometric causal model for policy analysis developed by the seminal ideas of Ragnar Frisch and Trygve Haavelmo. We compare the econometric causal model with two popular causal frameworks: Neyman-Holland causal model and the do-calculus. The Neyman-Holland causal model is based on the language of potential outcomes and was largely developed by statisticians. The do-calculus, developed by Judea Pearl and co-authors, relies on Directed Acyclic Graphs (DAGs) and is a popular causal framework in computer science. We make the case that economists who uncritically use these approximating frameworks often discard the substantial benefits of the econometric causal model to the detriment of more informative economic policy analyses. We illustrate the versatility and capabilities of the econometric framework using causal models that are frequently studied by economists.

More Research From These Scholars

BFI Working Paper Jun 12, 2023

Pricing Neighborhoods

Sadegh Eshaghnia, James Heckman, Goya Razavi
Topics:  Early Childhood Education, K-12 Education
BFI Working Paper Jun 30, 2021

The Dynastic Benefits of Early Childhood Education

Jorge Luis García, Frederik H. Bennhoff, Duncan Ermini Leaf, James Heckman
Topics:  Early Childhood Education
BFI Working Paper May 2, 2022

Measuring Knowledge

James Heckman, Jin Zhou
Topics:  Early Childhood Education