Correlation and causality

On the first day of class, I tell my undergraduates that if they only learn one thing in my course, I hope that it will be to recognize and appreciate the difference between correlation and causality. Most of the students laugh smugly, thinking they already know the difference. It never ceases to amaze me, however, when a cleverly designed exam question reveals how easily they can be tricked into forgetting the distinction.

Even among people who know the difference between correlation and causality, there is a lack of appreciation of the fact that when it comes to making public policy, only causal relationships are relevant. I’ve even attended lectures given by tenured professors at Harvard who fail to understand this simple point.

The example I often use to demonstrate why we don’t want to make public policy based on correlations is particularly relevant today in light of the Chicago Bears playing in the Super Bowl. In my example, Chicago’s beloved Mayor Daley is trying to think of ways to increase the likelihood that the Bears win the game. He’s noticed that whenever the Bears win, people in Chicago are happy. Which sparks a great idea: decree that all Bears fans have to be happy on Super Bowl Sunday. It has always been true in the past that winning games and being happy go together, so by demanding the Bears’ fans are happy, it will cause the Bears to win the Super Bowl.

Of course, Mayor Daley is smarter than that. Hopefully you are too and you understand why such a decree would be ludicrous. If not, I encourage you to start over at the beginning of this blog entry and try again.

Should Mayor Daley decree that all Chicago Bears fans be happy tomorrow?” by Steven D. Levitt, Freakonomics blog, February 3, 2007

A basic proposition of economics is that talk is cheap.

Dear Economist, by Tim Harford, Financial Times, February 2, 2007

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Posted in: Economics

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