On the behavioral consequences of reverse causality

Ran Spiegler ()

European Economic Review, 2022, vol. 149, issue C

Abstract: Reverse causality is a common attribution error that distorts the evaluation of private actions and public policies. This paper explores the implications of this error when a decision maker acts on it and therefore affects the very statistical regularities from which he draws faulty inferences. Applying the Bayesian-network approach of Spiegler (2016), I explore the equilibrium effects of a certain class of reverse-causality errors, in the context of an example with a quadratic-normal parameterization. I show that the decision context may protect the decision maker from his own reverse-causality error. That is, the cost of reverse-causality errors can be lower for everyday decision makers than for an outside observer who evaluates their choices.

Keywords: Reverse causality; Bayesian networks; Causal models; Non-rational expectations (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Working Paper: On the Behavioral Consequences of Reverse Causality (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:149:y:2022:i:c:s0014292122001520

DOI: 10.1016/j.euroecorev.2022.104258

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