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Causation in economics has a long history with Adam Smith explicitly acknowledging its importance via his (1776) An Inquiry into the Nature and Causes of the Wealth of Nations and David Hume (1739, 1742, 1777) and John Stuart Mill (1848) both offering important contributions with more philosophical discussions.
Rubin defines a causal effect: Intuitively, the causal effect of one treatment, E, over another, C, for a particular unit and an interval of time from to is the difference between what would have happened at time if the unit had been exposed to E initiated at and what would have happened at if the unit had been exposed to C initiated at : 'If an hour ago I had taken two aspirins instead of ...
Causality is an influence by which one event, process, state, or object (a cause) contributes to the production of another event, process, state, or object (an effect) where the cause is at least partly responsible for the effect, and the effect is at least partly dependent on the cause. [1]
Judea Pearl defines a causal model as an ordered triple ,, , where U is a set of exogenous variables whose values are determined by factors outside the model; V is a set of endogenous variables whose values are determined by factors within the model; and E is a set of structural equations that express the value of each endogenous variable as a function of the values of the other variables in U ...
Causal inference is the process of determining the independent, actual effect of a particular phenomenon that is a component of a larger system. The main difference between causal inference and inference of association is that causal inference analyzes the response of an effect variable when a cause of the effect variable is changed.
Since the question of "true causality" is deeply philosophical, and because of the post hoc ergo propter hoc fallacy of assuming that one thing preceding another can be used as a proof of causation, econometricians assert that the Granger test finds only "predictive causality". [2]
Establishing causal relationships is the aim of many scientific studies across fields ranging from biology [1] and physics [2] to social sciences and economics. [3] It is also a subject of accident analysis, [ 4 ] and can be considered a prerequisite for effective policy making.
Causal reasoning is the process of identifying causality: the relationship between a cause and its effect.The study of causality extends from ancient philosophy to contemporary neuropsychology; assumptions about the nature of causality may be shown to be functions of a previous event preceding a later one.