The confounding problem of the counterfactual in economic explanation

Economists who have emphasized uncertainty have tended to draw a sharp epistemic distinction between an ascertainable past and an unknowable future. But in one critical respect – in extracting causal relationships – the epistemic distinction is unsustainable. Many types of causal arguments in economics depend on counterfactual reasoning. Counterfactualizing entails the construction of fictions about what would have happened or would happen in the world absent an event that is taken to be causal. But that alternative world is foreclosed the moment the causal event occurs. Complicating matters, there is no dependable method for ascertaining the uniquely true counterfactual. Distinct research methods, and distinct economic paradigms, generate alternative plausible counterfactual accounts. This implies that causal claims in economics, too, are irreducibly fictitious – regardless of whether the subject matter concerns the past, or the future.