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Remember correlation does not imply causation. Apple prices and divorce rates are correlated too!

by fooker 3y ago

sebtron 3y ago
My favorite one is chocolate consumption vs nobel prize winners by country.
CoastalCoder 3y ago
Honest question: what standards of evidence do people have for concluding causation (in physical systems)?
- fooker 3y ago
  Experiemnts that try to fix or eliminate other variables. This is usually not possible for economics and other social sciences.
- vladms 3y ago
  I think the gold standard is experimenting for physical systems. Then you can control for whatever you want. For medicine it would be double blind study (select participants, split them in 2 groups, then you know the groups are the same, give one group the medicine, give the other group placebo). And then we get to social sciences - like economics - very hard to make an experiment. You can't just play with the interest rate to write a paper...
  - vkou 3y ago
    Yes, it's difficult to run macroeconomic experiments. The question still stands. What degree of evidence is sufficient to not be off-hand-dismissed with 'Correlation does not imply causation'?
    - ttyprintk 3y ago
      Since inferring causality is hard, we look for counterexamples that disprove it. Hence the reliance on randomization and the null hypothesis. A counterexample in social sciences might be that the corresponding relationship is found across methodologies and cultures. This turns a question of causal inference into questioning the power of overturning longitudinal data. Statisticians differ about the philosophy on that.
  - ttyprintk 3y ago
    I agree it depends on the domain. “Successful randomization” might be a more helpful term than “gold standard” here because in this domain the amount of covariance with gold prices is embedded into some people’s arguments.
  - deleted 3y ago
    [deleted]
- hackerlight 3y ago
  In social sciences: natural experiments. In medical sciences: interventions.
hgomersall 3y ago
Given the stated aim of higher interest rates is to increase unemployment, it's not a stretch to expect a causative effect. That said, I'm sceptical the higher interest rates achieve the stated aim in any sense, though even screwing over the poor with higher mortgage and loan payments could easily increase crime.
- konschubert 3y ago
  Except when the higher interest rates result in a "soft landing". https://www.noahpinion.blog/p/how-did-the-us-achieve-a-soft-landing https://www.noahpinion.blog/p/how-did-the-us-achieve-a-soft-... And yes, higher interest rates do reduce inflation.
  - hgomersall 3y ago
    I know people keep saying "higher interest rates do reduce inflation", but I'm yet to see any supporting evidence for this. Japan is a nice example where the exact opposite appears to be true. The soft landing in the US could easily just be down to the stimulus effect of handing out free money in the form of interest when inflation was going to come down anyway as the supply shocks work through the system. Interest rates predictably influencing inflation is now on the level of a test of faith.
vidarh 3y ago
Good thing the article writer is actually aware of this.
aitchnyu 3y ago
There was a blog which posted funny high correlation quantities. Wonder if newer algorithms can find clusters of quantities and try to infer causation. Like it could determine fuel prices, food prices and people going hungry as a cluster.
- actionfromafar 3y ago
  Any causation where someone lives to tell the tale, is tricky to fully tease out. Everything is feedback loops.
- pocketarc 3y ago
  This is the one, and it's great fun to look at: https://tylervigen.com/spurious-correlations https://tylervigen.com/spurious-correlations
neilwilson 3y ago
Blair Fix would agree with you "Do High Interest Rates Reduce Inflation? A Test of Monetary Faith"[0] [0]: https://economicsfromthetopdown.com/2023/02/04/do-high-interest-rates-reduce-inflation-a-test-of-monetary-faith/ https://economicsfromthetopdown.com/2023/02/04/do-high-inter...

Remember correlation does not imply causation. Apple prices and divorce rates are correlated too!

by fooker 3y ago

Remember correlation does not imply causation. Apple prices and divorce rates are correlated too!

sebtron 3y ago

My favorite one is chocolate consumption vs nobel prize winners by country.

CoastalCoder 3y ago

Honest question: what standards of evidence do people have for concluding causation (in physical systems)?

fooker 3y ago
Experiemnts that try to fix or eliminate other variables. This is usually not possible for economics and other social sciences.
vladms 3y ago
I think the gold standard is experimenting for physical systems. Then you can control for whatever you want. For medicine it would be double blind study (select participants, split them in 2 groups, then you know the groups are the same, give one group the medicine, give the other group placebo). And then we get to social sciences - like economics - very hard to make an experiment. You can't just play with the interest rate to write a paper...
- vkou 3y ago
  Yes, it's difficult to run macroeconomic experiments. The question still stands. What degree of evidence is sufficient to not be off-hand-dismissed with 'Correlation does not imply causation'?
  - ttyprintk 3y ago
    Since inferring causality is hard, we look for counterexamples that disprove it. Hence the reliance on randomization and the null hypothesis. A counterexample in social sciences might be that the corresponding relationship is found across methodologies and cultures. This turns a question of causal inference into questioning the power of overturning longitudinal data. Statisticians differ about the philosophy on that.
- ttyprintk 3y ago
  I agree it depends on the domain. “Successful randomization” might be a more helpful term than “gold standard” here because in this domain the amount of covariance with gold prices is embedded into some people’s arguments.
- deleted 3y ago
  [deleted]
hackerlight 3y ago
In social sciences: natural experiments. In medical sciences: interventions.

hgomersall 3y ago

Given the stated aim of higher interest rates is to increase unemployment, it's not a stretch to expect a causative effect. That said, I'm sceptical the higher interest rates achieve the stated aim in any sense, though even screwing over the poor with higher mortgage and loan payments could easily increase crime.

konschubert 3y ago
Except when the higher interest rates result in a "soft landing". https://www.noahpinion.blog/p/how-did-the-us-achieve-a-soft-landing https://www.noahpinion.blog/p/how-did-the-us-achieve-a-soft-... And yes, higher interest rates do reduce inflation.
- hgomersall 3y ago
  I know people keep saying "higher interest rates do reduce inflation", but I'm yet to see any supporting evidence for this. Japan is a nice example where the exact opposite appears to be true. The soft landing in the US could easily just be down to the stimulus effect of handing out free money in the form of interest when inflation was going to come down anyway as the supply shocks work through the system. Interest rates predictably influencing inflation is now on the level of a test of faith.

vidarh 3y ago

Good thing the article writer is actually aware of this.

aitchnyu 3y ago

There was a blog which posted funny high correlation quantities. Wonder if newer algorithms can find clusters of quantities and try to infer causation. Like it could determine fuel prices, food prices and people going hungry as a cluster.

actionfromafar 3y ago
Any causation where someone lives to tell the tale, is tricky to fully tease out. Everything is feedback loops.
pocketarc 3y ago
This is the one, and it's great fun to look at: https://tylervigen.com/spurious-correlations https://tylervigen.com/spurious-correlations

neilwilson 3y ago

Blair Fix would agree with you "Do High Interest Rates Reduce Inflation? A Test of Monetary Faith"[0] [0]: https://economicsfromthetopdown.com/2023/02/04/do-high-interest-rates-reduce-inflation-a-test-of-monetary-faith/ https://economicsfromthetopdown.com/2023/02/04/do-high-inter...