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On Correlation and Causation


One of the big questions for the American economy is when job growth will resume.  In order for the economy to have a sustainable period of growth, companies have to hire workers.

One thesis is that there is a historic correlation between power production and job growth.  On its surface, this correlation makes some kind of intuitive sense: the more workers there are, the more people are using computers, telephones, fax machines, copiers, lights, cars and trucks, and all other manner of modern energy-consuming things.  So, as more people are hired, utilities should produce more power.

But does it follow that more power consumption means more jobs?  Or is the correlation just a coincidence?  In other words, just because there is a correlation between two variables (in this case, job growth and the supply of power) does not mean that one causes the other.  We don’t have the evidence for that.

This correlation has been reported here, here, and here.

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Categories: Economy
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