Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/90070 
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Papers No. 7628
Publisher: 
Institute for the Study of Labor (IZA), Bonn
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 de fined 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.
Subjects: 
causality
identification
do-calculus
directed acyclic graphs
simultaneous treatment effects
JEL: 
C10
C18
Document Type: 
Working Paper

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