Causal Data Science in Business

A while back I was posting about Facebook’s causal inference group and how causal data science tools slowly find their way from academia into business. Since then I came across many more examples of well-known companies investing in their causal inference (CI) capabilities: Microsoft released its DoWhy library for Python, providing CI tools based on Directed Acylic Graphs (DAGs); I recently met people from IBM Research interested in the topic; Zalando is constantly looking for people to join their CI/ML team; and Lufthansa, Uber, and Lyft have research units working on causal AI applications too.

The topic of causal inference seems to be booming at the moment—and for good reasons.

Causal knowledge is crucial for decision-making. Take the example of an advertiser who wants to know how effective her company’s social media marketing campaign on Instagram is. Unfortunately, our current workhorse tools in machine learning are not capable of answering such a question.

A decision tree classifier might give you a very precise estimate that ads which use blue colors and sans-serif fonts are associated with 12% higher click-through rates. But does that mean that every advertising campaign should switch to that combination in order to boost user engagement? Not necessarily. It might just reflect the fact that a majority of Fortune-500 firms—the ones with great products—happen to use blue and sans-serif in their corporate designs.

This is what Judea Pearl—father of causality in artificial intelligence—calls the difference between “seeing” and “doing”. Standard machine learning tools are designed for seeing, observing, discerning patterns. And they’re pretty good at it! But management decisions very often involve “doing”, as long the goal is to manipulate a variable X (e.g., ad design, team diversity, R&D spending, etc.) in order to achieve an effect on another variable Y (click-through rate, creativity, profits, etc.).

In my group we recently won a grant for a research project in which we want to learn more about how this crucial difference affects business practices. In particular, we want to know what kind of questions companies are trying to answer with their data science efforts, and whether these questions require causal knowledge. We also want to understand better whether firms are using appropriate tools for their respective business applications, or whether there’s a need for major retooling in the data science community. After all, there might be important questions that currently remain unanswered, because companies lack the causal inference skills to address them. That’s certainly another issue we would like to explore.

So, if you working in the field of data science and machine learning, and you’re interested in causality, please come talk to us! We would love to hear about your experiences. Slowly but surely, causal inference seems to develop into one of the hottest trends in the tech sector right now, and our goal is to shed more light on this phenomenon with our research.

Beyond Curve Fitting

Last week I attended the AAAI spring symposium on “Beyond Curve Fitting: Causation, Counterfactuals, and Imagination-based AI”, held at Stanford University. Since Judea Pearl and Dana Mackenzie published “The Book of Why”, the topic of causal inference gains increasing momentum in the machine learning and artificial intelligence community. If we want to build truly intelligent machines, which are able to interact with us in a meaningful way, we have to teach them the concept of causality. Otherwise, our future robots will never be able to understand that forcing the rooster to crow at 3am in the morning won’t make the sun appear. Continue reading Beyond Curve Fitting

No Free Lunch in Causal Inference

Last week I was teaching about graphical models of causation at a summer school in Montenegro. You can find my slides and accompanying R code in the teaching section of this page. It was lots of fun and I got great feedback from students. After the workshop we had stimulating discussions about the usefulness of this new approach to causal inference in economics and business. I’d like to pick up one of those points here, as this is an argument I frequently hear when talking to people with a classical econometrics training. Continue reading No Free Lunch in Causal Inference

Econometrics and the “not invented here” syndrome: suggestive evidence from the causal graph literature

[This post requires some knowledge of directed acyclic graphs (DAG) and causal inference. Providing an introduction to the topic goes beyond the scope of this blog though. But you can have a look at a recent paper of mine in which I describe this method in more detail.]

Graphical models of causation, most notably associated with the name of computer scientist Judea Pearl, received a lot of pushback from the grandees of econometrics. Heckman had his famous debate with Pearl, arguing that economics looks back on its own tradition of causal inference, going back to Haavelmo, and that we don’t need DAGs. Continue reading Econometrics and the “not invented here” syndrome: suggestive evidence from the causal graph literature

Judea Pearl on Angrist and Pischke

Today, Judea Pearl commented on a new NBER working paper by Josh Angrist and Jörn-Steffen Pischke in a mail for subscribers to the UCLA Causality Blog. I think the text is too good to hide it in a mailing list though. That’s why I will quote it here:

Overturning Econometrics Education
(or, do we need a “causal interpretation”?)

My attention was called to a recent paper by Josh Angrist and Jorn-Steffen Pischke titled; “Undergraduate econometrics instruction” (A NBER working paper)
http://www.nber.org/papers/w23144?utm_campaign=ntw&utm_medium=email&utm_source=ntw

This paper advocates a pedagogical paradigm shift that has methodological  ramifications beyond econometrics instruction;  As I understand it, the shift stands contrary to the traditional teachings of causal inference, as defined by Sewal Wright (1920), Haavelmo (1943), Marschak (1950), Wold (1960), and other founding fathers of econometrics methodology.

In a nut shell, Angrist and Pischke  start with a set of favorite statistical routines such as IV, regression, differences-in-differences among others, and then search for “a set of control variables needed  to insure that the regression-estimated effect of the variable of interest has a causal interpretation” Traditional causal inference (including economics)  teaches us that asking whether the output of a statistical routine “has a causal interpretation” is the wrong question to ask, for it misses the direction of the analysis. Instead, one should start with the target causal parameter itself, and asks whether it is ESTIMABLE (and if so how),  be it by IV, regression, differences-in-differences, or perhaps by some new routine that is yet to be discovered and ordained by name. Clearly, no “causal interpretation” is needed for parameters that are intrinsically causal; for example, “causal effect” “path coefficient”, “direct effect” or “effect of treatment on the treated” or “probability of causation”

In practical terms, the difference  between the two paradigms is that estimability requires a substantive model while interpretability appears to be model-free.
A model exposes its assumptions explicitly, while statistical routines give the deceptive impression that they run assumptions-free ( hence their popular appeal). The former lends itself to judgmental and statistical tests, the latter escapes such scrutiny.

In conclusion, if an educator needs to choose between the “interpretability” and “estimability” paradigms, I would go for the latter. If traditional econometrics education is tailored to support the estimability track, I do not believe a paradigm shift is warranted towards an “interpretation seeking” paradigm as the one proposed by Angrist and Pischke,

I would gladly open this blog for additional discussion on this topic.

I tried to post a comment on NBER (National Bureau of Economic Research), but was rejected for not being an approved “NBER family member”. If any of our readers is a “”NBER family member” feel free to post the above.

Note: “NBER working papers are circulated for discussion and comment purposes.” (page 1).

Judea

Update: By now, the text has been published on the causality blog.

Different stages of empirical research

Eventually, the job market stress comes to an end. So I thought I could start into the blogging year with a bit of humor. During the last couple of weeks I flew out to both economics and more management-oriented departments. That’s were the inspiration for this little comic came from.

state_of_empirical_cropped