Causal Inference

Correlation is cheap; causation is the question that matters for decisions. Causal inference is the toolkit for answering "what would happen if we did X?" — from experiments when possible, and from observational data with explicit assumptions when not.

Overview

Every causal claim rests on assumptions — the craft is making them explicit and testing them. Draw the causal graph (DAG) to see what confounds what. Choose the identification strategy that fits: randomization, or quasi-experiments (difference-in-differences, regression discontinuity, instrumental variables), or adjustment with careful confounder selection. Then probe robustness: sensitivity analysis asks how wrong the assumptions would need to be to overturn the conclusion.

When to use

• Deciding whether an intervention works: policy, product change, treatment.
• Estimating effects from data you didn't experimentally control.
• Reviewing causal claims: checking whether the design supports the conclusion.
• Choosing between running an experiment and analyzing existing data.

Core concepts

• Potential outcomes: the causal effect is the difference between what happened with treatment and what would have happened without it. The fundamental problem: you never observe both. All methods are ways around this.
• DAGs: directed acyclic graphs mapping assumed causal structure — confounders (common causes), mediators (mechanisms), colliders (conditioning on them biases). Draw it before choosing an analysis.
• Confounding control: adjust for confounders (backdoor paths), never for mediators or colliders. The DAG tells you which variables to include — "control for everything" is wrong.
• Quasi-experiments: difference-in-differences (parallel trends assumption), regression discontinuity (threshold assignment), instrumental variables (exclusion restriction). Each trades randomization for a different assumption — name it, defend it.
• Propensity methods: matching, weighting, or doubly-robust estimation to balance treated and control groups on observables. Only as good as the observed confounders.
• Sensitivity analysis: how strong would unmeasured confounding need to be to explain away the effect? Report it; it's the honest answer to "but what if you missed something?"

Practical workflow

1. Define the treatment, outcome, and the decision the estimate informs.
2. Draw the DAG: hypothesized confounders, mediators, colliders. Get domain experts to critique it.
3. Choose identification: experiment if feasible; otherwise the quasi-experimental design whose assumptions you can best defend.
4. Estimate with appropriate methods; use doubly-robust approaches where available.
5. Run sensitivity analyses and placebo/falsification tests (effects where none should exist).
6. Report the estimate with uncertainty, the assumptions it rests on, and what would overturn it.

Causal analysis checklist:
[ ] Treatment, outcome, estimand precisely defined
[ ] DAG drawn and critiqued; adjustment set derived from it
[ ] Identification strategy named with its key assumption
[ ] No adjustment for mediators/colliders
[ ] Falsification tests run (placebos, pre-trends)
[ ] Sensitivity to unmeasured confounding reported

Common pitfalls

• Controlling for everything: adjusting for mediators (kills the effect) or colliders (creates bias). The DAG decides, not the kitchen sink.
• Unstated assumptions: every observational method assumes something untestable. Name it explicitly.
• No falsification: never testing where the method should find nothing. Placebos are cheap credibility.
• Causal language from predictive models: a regression coefficient is not a causal effect without a causal design.
• Ignoring the estimand: "the effect" of what, on whom, compared to what? Define it before estimating.
• Fragile identification: an IV with a weak first stage or a DiD with shaky parallel trends. Weak designs produce confident-looking noise.