Introduction

Counterfactuals are a hot topic in economics today, at least among economists concerned with methodology. I shall argue that on the whole this is commonly a mistake. Frequently 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 system. Otherwise they are irrelevant to establishing facts about causation. On the other hand, viewed just as straight counterfactuals, they are a wash-out 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.

I will focus on Nobel-prize-winning Chicago economist James Heckman, since his views are becoming increasingly influential. Heckman is well known for his work on the evaluation of programmes for helping workers more effectively to enter and function in the labour market. I shall also discuss economist Stephen LeRoy, who has been arguing for a similar view for a long time, but who does not use the term ‘counterfactual’ to describe it. I shall also discuss recent work of Judea Pearl, well known for his work on Bayesian nets and causality, econometrician David Hendry and economist/methodologist Kevin Hoover, as well as philosopher of economics, Daniel Hausman.