The Philosophy of Causality in Economics: Causal Inferences and Policy Proposals (Routledge INEM Advances in Economic Methodology)

Approximately one in six top economic research papers draws an explicitly causal conclusion. But what do economists mean when they conclude that __A__ ‘causes’ __B__? Does ‘cause’ say that we can influence __B__ by intervening on __A__, or is it only a label for the correlation of variables? Do quantitative analyses of observational data followed by such causal inferences constitute sufficient grounds for guiding economic policymaking? __The Philosophy of Causality in Economics__ addresses these questions by analyzing the meaning of causal claims made by economists and the philosophical presuppositions underlying the research methods used. The book considers five key causal approaches: the regularity approach, probabilistic theories, counterfactual theories, mechanisms, and interventions and manipulability. Each chapter opens with a summary of literature on the relevant approach and discusses its reception among economists. The text details case studies, and goes on to examine papers which have adopted the approach in order to highlight the methods of causal inference used in contemporary economics. It analyzes the meaning of the causal claim put forward, and finally reconstructs the philosophical presuppositions accepted implicitly by economists. The strengths and limitations of each method of causal inference are also considered in the context of using the results as evidence for policymaking. This book is essential reading to those interested in literature on the philosophy of economics, as well as the philosophy of causality and economic methodology in general. Cover Half Title Series Page Title Page Copyright Page Dedication Page Contents Preface and acknowledgment 1 Introduction 1.1 The meaning of causality 1.2 On referentialist semantics, case studies, and the choice of sample 1.3 The structure of the book 2 Regularities 2.1 Reducing causality to constant conjunctions 2.1.1 From constant conjunctions to the regularity view of laws 2.1.2 Further developments 2.1.3 Criticism and rejection of the regularity view 2.1.4 The regularity approach in the philosophy of economics 2.2 Establishing constant regularities 2.2.1 Econometric research 2.2.2 Cliometrics 2.2.3 Other methods 2.3 Policymaking on the basis of regularities 2.3.1 Cliometric results and (failed) interventions 2.3.2 Is theory-driven econometrics more reliable? 2.4 You shall not translate causal claims 3 Causality as changes in conditional probability 3.1 Probabilistic theories of causality 3.1.1 The menu of probabilistic definitions 3.1.2 Criticism and further differences 3.1.3 Probabilistic causality in the philosophy of economics 3.2 Testing for probabilistic dependencies 3.2.1 Causal inference from time-series data 3.2.2 Atheoretical, cross-sectional models 3.3 The common-cause fallacy and policy actions 3.4 Policymaking based on limited knowledge of causal structure 4 Counterfactuals 4.1 Counterfactual conditionals and causality 4.1.1 Classical formulation 4.1.2 Recent developments 4.1.3 Counterfactuals in the philosophy of economics 4.1.4 Philosophical views on inferring counterfactuals 4.2 Counterfactuals and causal inference in economics 4.2.1 What would be the level of economic development if a stimulus were not introduced? 4.2.2 Case study of the influence of intellectual property on R&D 4.3 Counterfactuals and economic policymaking 4.4 Counterfactuals for the sake of knowledge or policymaking? 5 Mechanisms 5.1 The mechanistic theories of causality 5.1.1 What is a causal mechanism? 5.1.2 What are the mechanisms suitable for? 5.1.3 Mechanisms in the philosophy of economics 5.2 Developing mechanistic models 5.2.1 A purely theoretical model 5.2.2 Calibrated theoretical models 5.2.3 The DSGE framework 5.2.4 Qualitative inference of mechanisms 5.3 Using mechanistic evidence for policy 5.3.1 From possibility to actuality: mechanist’s circle 5.3.2 Actual mechanisms and external influences 5.3.3 The advantage of mechanistic evidence 5.4 Mechanisms as evidence for institutional reforms 6 Interventions and manipulability 6.1 The manipulationist theories and philosophical problems of experimentation 6.1.1 Manipulationist theories and their pitfalls 6.1.2 The manipulability account in economic methodology 6.2 Experimental and quasi-experimental research designs in economics 6.2.1 Instrumental variable (IV) estimation as a quasi-experiment 6.2.2 Natural experiments: regression discontinuity design 6.2.3 Laboratory experiments 6.2.4 Randomized field experiments 6.3 Is extrapolation from experimental studies always problematic? 6.3.1 Causal structures and populations 6.3.2 The two types of extrapolation 6.3.3 Toward contextualized experimental evidence 6.4 Manipulationist evidence and interventions 7 Concluding remarks 7.1 Causal pluralism in economics 7.2 The meaning of causal claims and translation for policymaking 7.3 Further research Index "Approximately one in six top economic research papers draws an explicitly causal conclusion. But what do economists mean when they conclude that A 'causes' B? Does 'cause' say that we can influence B by intervening on A, or is it only a label for the correlation of variables? Do quantitative analyses of observational data followed by such causal inferences constitute sufficient grounds for guiding economic policymaking? The Philosophy of Causality in Economics addresses these questions by analyzing the meaning of causal claims made by economists and the philosophical presuppositions underlying the research methods used. The book considers five key causal approaches: the regularity approach, probabilistic theories, counterfactual theories, mechanisms, and interventions and manipulability. Each chapter opens with a summary of literature on the relevant approach and discusses its reception amongst economists. The text details case studies, and goes on to examine papers which have adopted the approach in order to highlight the methods of causal inference used in contemporary economics. It analyses the meaning of the causal claim put forward, and finally reconstructs the philosophical presuppositions accepted implicitly by economists. The strengths and limitations of each method of causal inference are also considered in the context of using the results as evidence for policymaking. This book is essential reading to those interested in literature on philosophy of economics, as well as the philosophy of causality and economic methodology in general"-- Provided by publisher