September 2001

IZA DP No. 354: On the Role of Counterfactuals in Inferring Causal Effects of Treatments

revised version published as'On the Role of Counterfactuals in Inferring Causal Effects' in: Foundations of Science, 2004, 9 (1), 65-101

Causal inference in the empirical sciences is based on counterfactuals. This paper presents the counterfactual account of causation in terms of Lewis’s possible-world semantics, and reformulates the statistical potential outcome framework and its underlying assumptions using counterfactual conditionals. I discuss varieties of causally meaningful counterfactuals for the case of a finite number of treatments, and illustrate these using a simple set-theoretical framework. The paper proceeds to examine proximity relations between possible worlds, and discusses implications for empirical practice.