Causality, Confounding, and Simpson’s Paradox

Year 2020, Volume: 12 Issue: 1, 50 - 74, 08.06.2020

Asad Zaman Taseer Salahuddin

https://doi.org/10.33818/ier.687042

Abstract

Bitter fighting among Christian factions and immoral behavior among Church leaders led to a transition to secular thought in Europe (see Zaman (2018) for details). One of the consequences of rejection of religion was the rejection of all unobservables. Empiricists like David Hume rejected all knowledge which was not based on observations and logic. He famously stated that: ““If we take in our hand any volume; of divinity or school metaphysics, for instance; let us ask, Does it contain any abstract reasoning concerning quantity or number? No. Does it contain any experimental reasoning concerning matter of fact and existence? No. Commit it then to the flames: for it can contain nothing but sophistry and illusion.” David Hume further realized that causality was not observable. This means that it is observable that event Y happened after event X, but it is not observable that Y happened due to X. The underlying mechanisms which connect X to Y are not observable. Current Article discusses the impact of changing causal structures on relationships and results of econometric analysis. it shows that conventional econometric analysis is devoid of causal chains which makes it impossible to get realistic results.

Keywords

Causality, Causal structures, Confounders, Mediators

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