# Potential Outcome and Directed Acyclic Graph Approaches to Causality: Relevance for Empirical Practice in Economics

## TL;DR

This paper compares potential outcome and directed acyclic graph approaches to causality, highlighting their relevance and differences for empirical economic research, and emphasizing the practical utility of the potential outcome framework.

## Contribution

It provides a comparative analysis of causality frameworks in economics, clarifying their applicability and advantages for empirical practice.

## Key findings

- Potential outcome framework aligns closely with empirical economic questions.
- Directed acyclic graphs offer visual and structural insights into causal relationships.
- Most economic empirical work is more compatible with the potential outcome approach.

## Abstract

In this essay I discuss potential outcome and graphical approaches to causality, and their relevance for empirical work in economics. I review some of the work on directed acyclic graphs, including the recent "The Book of Why," by Pearl and MacKenzie. I also discuss the potential outcome framework developed by Rubin and coauthors, building on work by Neyman. I then discuss the relative merits of these approaches for empirical work in economics, focusing on the questions each answer well, and why much of the the work in economics is closer in spirit to the potential outcome framework.