by From Asad Zaman Defining Feature of Real Econometrics We can define “Real Econometrics” as being the search for causal relationships within a collection of variables. There exists an enormous amount of confusion about what exactly is a causal relationship. We will take a simple and practical approach, developed by Woodward in his book on “Making Things Happen”. Given a collection of variables X,Y,Z1,Z2,…,Zn, we will say that X is a cause of Y if we can create changes in Y by changing the values of X. This is a “practical” definition in the sense that if we learn about causal relationship, we can use it to create changes in the world around us. Why is there confusion about causality? Children (and animals) are born with the ability to learn about causal relationships, and to use them to
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from Asad Zaman
Defining Feature of Real Econometrics
We can define “Real Econometrics” as being the search for causal relationships within a collection of variables. There exists an enormous amount of confusion about what exactly is a causal relationship. We will take a simple and practical approach, developed by Woodward in his book on “Making Things Happen”. Given a collection of variables X,Y,Z1,Z2,…,Zn, we will say that X is a cause of Y if we can create changes in Y by changing the values of X. This is a “practical” definition in the sense that if we learn about causal relationship, we can use it to create changes in the world around us.
Why is there confusion about causality?
Children (and animals) are born with the ability to learn about causal relationships, and to use them to bring about desirable changes in their external environment. Since understanding of causation is built deeply into us, ordinary people find it difficult to understand why philosophers are so confused about causality. We need to discuss this issue because dominant methodology of statistics and econometrics is built on foundations of a philosophy (logical positivism) which is a source of enormous confusion. However, students should not worry if they fail to understand the source of this confusion. The point of trying to explain this is to explain why conventional statistics and econometrics is wrong. It does not matter for learning real statistics. read more