From the course: The Data Science of Economics, Banking, and Finance, with Barton Poulson

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Correlation and causality in economic data

Correlation and causality in economic data

From the course: The Data Science of Economics, Banking, and Finance, with Barton Poulson

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Correlation and causality in economic data

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- [Instructor] You know the question, if a tree falls in the forest and there's no one there to hear it, does it make a sound? Well, there's a similar kind of question for data scientists, and it goes like this, if an algorithm finds a correlation but there's no one there to see it, does it still lead to a causal inference? There's a few reasons to ask this. Number one is because we all know correlation doesn't imply causation. Just because two things are correlated, doesn't mean that one causes the other. This is a dictum that's been hammered in for a long time, but another reason is this, algorithms don't make inferences about causation, people do. Machine learning algorithms simply find consistencies or patterns in the data, making the leap to causation is a psychological process. Now, let me tell you why this matters, there's a couple of reasons. Number one, it actually may turn out that correlation is sufficient for your purposes and maybe all you need is an association between…

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