Why it matters
Policy and business decisions ask what would change if an action were taken. That requires a credible comparison with what would happen without the action.
A worked example
To study a training programme, compare outcomes with a credible estimate of outcomes without the programme—not merely with participants’ earlier earnings.
Illustrative example · simplified assumptionsA common mistake
Assuming everything that happened after a programme was caused by it.
Where the idea needs care
A credible counterfactual requires a research design and assumptions. A before–after comparison alone may mix the programme with other changes.
Apply the idea
Explain this concept using a different example from your spending, work, business or a policy debate. State what stays fixed and what could change the result.
See the supporting infographic
The written explanation above is the main lesson. This image offers another way to remember it.
Sources and further study
Examples and explanations by Alibomics. Numeric illustrations are not current market quotations.