Counterfactuals in economics : a commentary.

Abstract

Counterfactuals are a hot topic in economics today, at least among economists concerned with methodology. I shall argue that on the whole this is a mistake. Usually the counterfactuals on offer are proposed as causal surrogates. But at best they provide a “sometimes” way for finding out about causal relations, not a stand-in for them. I say a “sometimes way” because they do so only in very special -- and rare -- kinds of systems. Otherwise they are irrelevant to establishing facts about causation. On the other hand, viewed just as straight counterfactuals, they are a washout as well. For they are rarely an answer to any genuine “What if…?” questions, questions of the kind we pose in planning and evaluation. For these two reasons I call the counterfactuals of recent interest in economics, impostor counterfactuals.