Explain the potential outcomes framework and its importance in causal inference.
Instruction: Describe the potential outcomes framework and discuss how it aids in understanding causal effects.
Context: This question tests the candidate’s knowledge of fundamental concepts in causal inference and their application in modeling.
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For a defined unit, treatment and horizon, Y_i(1) is the outcome under treatment and Y_i(0) under control. The individual causal effect is their difference. Under consistency, the observed outcome is the potential outcome corresponding to the treatment actually received.
Usually only one of these outcomes is observed for the same unit and occasion...