Correlation Is Not Causation

Just because two variables seem related or appear related on a scatter plot does not mean that one causes another. Economists 100 years ago correlated business cycles (the ups and downs of the entire economy) with sunspots. Because they appeared related, some suggested that sunspots caused business cycles. The only rational argument was that agriculture was the dominant industry and sunspots affected the weather; therefore, sunspots caused the economy to fluctuate.

Other examples of erroneously assuming that correlation implies causality abound, some of which can be preposterous or humorous. For example, did Facebook cause the Greek debt crisis? Both the number of Facebook users and the total Greek debt skyrocketed between the years of 2005 and 2015. Just because two variables appear to be related does not mean that one causes the other to change.

Understanding graphs and using simple equations are a key part of learning economics. Practice helps.