Abstract
Causality is a powerful concept which is at the heart of markets. Often, one wants to establish whether a particular attribute causes another. As human beings, we have perceived causality through correlation. Because of this fact, causality has often been confused for correlation. This chapter studies the evolution of causality including the influential work of David Hume and its relevance to economics and finance. It studies various concepts and models of causality such as transmission, Granger and Pearl models of causality. The transmission model of causality states that for causality to exist, there should be a flow of information from the cause to the effect. Simple example of the study on the link between circumcision and risk of HIV are used in this chapter.
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Marwala, T., Hurwitz, E. (2017). Causality. In: Artificial Intelligence and Economic Theory: Skynet in the Market. Advanced Information and Knowledge Processing. Springer, Cham. https://doi.org/10.1007/978-3-319-66104-9_14
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DOI: https://doi.org/10.1007/978-3-319-66104-9_14
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