Question

"as soon as a mayor announced his/her get tough on crime policy on new years day, criminals got scared and the crime rate went down." suppose that the lower crime rate was actually caused by freezing cold temperatures in january¾it was just too cold for anybody to be out robbing other people. Which fundamental hazard of the economic way of thinking did the mayor make?

Answer 1

Answer: He did not identify a spurious relationship.

A spurious relationship is one where two variables are not causally connected to each other, but may be inferred that they are because of their simultaneous appearance and a similar behaviour. These two variables are only linked with each other by coincidence, or through a third variable.

In this case, the mayor assumes that the implementation of the new regulations caused the crime rate to go down, when in fact there is a third variable (weather) that was the true cause.

In other words, the mayor equated correlation with causation. This is a common mistake in economics due to the inability of economists to perform experiments, having to rely solely on statistical analysis. In order to be aware of this mistake, it is good to remember the motto "correlation is not causation."