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Lecture 8

MULT30018 Lecture Notes - Lecture 8: Ruin Theory, Counterfactual Thinking, Causal InferencePremium

2 pages90 viewsSpring 2018

Department
MULT
Course Code
MULT30018
Professor
Martin
Lecture
8

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WEEK 8 - Counterfactuals ('what if' thought experiments)
What is a counterfactual?
Means contrary to facts
In everyday parlance counterfactuals are 'what if' thought experiments
We run counterfactuals in our minds just about everyday
Can be positive or negative
Counterfactuals and causation
Remember, counterfactual thinking is implicit in all our thinking about causation up to this
point
With observational data our counterfactual is imagined whereas with experiments it is real
The power of experiments is that they create true counterfactuals (they hold the world
constant while manipulating one factor)
Lot's of contingency in the world, can imagine alternative worlds, not always positive or all
negative
Except in movies, we cant re-run history
Reality is complicated (contingent) so we cant really say only x then y
2000 election Bush v. Gore
Counterfactuals in social science
Counterfactuals are at the heart of what historians do
Counterfactuals can only be avoided if we avoid ALL causal inference
Most social science questions have an interesting counterfactual
Regression and experiments are often inadequate
So what? What are counterfactuals good for?
Counterfactuals help reveal logical inconsistencies
Counterfactuals make us aware of contingency of history
We should always ask: what is the counterfactual?
If (antecedent) not, would (consequent)?
For social science
o Need history to do counterfactuals but not the social science
o Politics - international relations, the biggest field for counterfactuals
Thought experiments become their primary mode
Don’t do quants because they don’t have access to data
Cant do a lot of things, a lot of their theories are based on counterfactuals
Trying to utilize our knowledge to predict what people are going to do in the future
Criminology
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