Potential Outcome and Directed Acyclic Graph Approaches to Causality: Relevance for Empirical Practice in Economics

Abstract

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," by Pearl and MacKenzie. 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 the work in economics is closer in spirit to the potential outcome framework.