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Causal Analysis after Haavelmo

51 Pages Posted: 25 Sep 2013  

James J. Heckman

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Rodrigo R. Pinto Sr.

University of Chicago - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 2013

Abstract

Haavelmo's seminal 1943 paper is the first rigorous treatment of causality. In it, he distinguished the definition of causal parameters from their identification. He showed that causal parameters are defined using hypothetical models that assign variation to some of the inputs determining outcomes while holding all other inputs fixed. He thus formalized and made operational Marshall's (1890) ceteris paribus analysis. We embed Haavelmo's framework into the recursive framework of Directed Acyclic Graphs (DAG) used in one influential recent approach to causality (Pearl, 2000) and in the related literature on Bayesian nets (Lauritzen, 1996). We compare an approach based on Haavelmo's methodology with a standard approach in the causal literature of DAGs- the "do-calculus" of Pearl (2009). We discuss the limitations of DAGs and in particular of the do-calculus of Pearl in securing identification of economic models. We extend our framework to consider models for simultaneous causality, a central contribution of Haavelmo (1944). In general cases, DAGs cannot be used to analyze models for simultaneous causality, but Haavelmo's approach naturally generalizes to cover it.

Suggested Citation

Heckman, James J. and Pinto, Rodrigo R., Causal Analysis after Haavelmo (September 2013). NBER Working Paper No. w19453. Available at SSRN: https://ssrn.com/abstract=2330655

James J. Heckman (Contact Author)

University of Chicago - Department of Economics ( email )

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American Bar Foundation

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CESifo (Center for Economic Studies and Ifo Institute)

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Rodrigo R. Pinto Sr.

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

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