If/Then All Else Equal: “Disentangling Causation and Correlation” with Guido Imbens
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Aug 7, 2024 Renowned economist Guido Imbens, a Nobel Prize winner in 2021, joins hosts Jonathan Berk and Jules van Binsbergen to unpack the complex relationship between causation and correlation. They explore how assumptions can misguide business decisions using relatable examples, like Starbucks influencing local sales. Discover surprising research on family succession, revealing that firms with daughters as firstborns often outshine others, and why rigorous testing is crucial for accurate insights in decision-making. Dive into the nuances that could reshape your perspective!
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Correlation vs. Causation
- Correlation doesn't equal causation; events occurring together don't mean one causes the other.
- Consider common factors, reverse causality, or random chance.
Muncie Example
- Muncie, Indiana's election results often predict national outcomes due to its representative population.
- Focusing campaign efforts solely on Muncie won't guarantee national victory; it's a common factor.
Cholera Example
- In 19th-century Russia, villagers wrongly assumed doctors caused cholera because they appeared where outbreaks occurred.
- This demonstrates reverse causality: doctors went where the sick were, not the other way around.