L4-06 · Potential outcomes and randomization
Define an average treatment effect and identify the assumptions that connect it to an observed contrast.
Learn¶
A potential outcome describes the outcome a unit would have under a specified treatment. Write Y(1) and Y(0) for two treatment options. The individual effect is their difference. Only the potential outcome corresponding to the received treatment is usually observed for each unit.
The average treatment effect is the population average of those individual differences. Random assignment makes treatment independent of potential outcomes in the assignment distribution. Together with consistency, positivity, and an appropriate treatment and interference definition, this permits identification by a comparison of treatment groups.
Randomization does not make every realized sample perfectly balanced. It supports uncertainty calculations based on the assignment design. Missing outcomes, treatment nonadherence, or interference can change the target and the analysis. Distinguish the effect of assignment from the effect of treatment actually received.
Practice¶
Solution
The individual effects are two, zero, three, and minus one. Their sum is four across four units, so the average treatment effect is one outcome unit.
Check your understanding¶
What does random assignment establish in its assignment distribution?
A. Treatment is independent of potential outcomes
B. Every finite sample is perfectly balanced
C. Every participant receives the assigned treatment
Show the answer
A. Treatment is independent of potential outcomes
Random assignment provides independence by design. Perfect realized balance and full adherence are different properties and do not follow automatically.
Sources¶
This lesson draws on Hernan & Robins, 2020.
Next: L4-07 · Identification before estimation
- Hernan, M., & Robins, J. (2020). Causal Inference: What If. https://miguelhernan.org/whatifbook
- Bareinboim, E. (2025). Causal Artificial Intelligence: A Roadmap for Building Causally Intelligent Systems. https://causalai-book.net/