Thursday, December 03, 2015

Cavalcade of Endogeneity: The Market Monetarist does Micro Edition

So on the Market Monetarist blog, I recently saw one of the worst examples of the correlation implies causality fallacy ever by a supposed professional economist.

There is a graph presented of a raw correlation between an index of property right protection in a country and an index of "environmental performance"

Look for yourself, here's the graph:

and then the hammer drops:

"So there you go. The one graph version of Free Market Environmentalism – if you are concerned about the environment you should really primarily concern yourself about the protection of property rights"

That is just a stunning leap from the graph.

Might we dare to think there is a third factor, I dunno, maybe income, that is causing both of these indices?

Or try it this way, if I presented a graph that showed government spending was positively correlated with environmental performance, would the Market Monetarist then conclude that big government was the way to protect the environment?

If not, why not? Why would my analysis be any worse than this?


Tom said...

Angus speculates "I dunno, maybe [higher] income" causes property rights (and other stuff). Isn't it much more likely that respect for property rights causes prosperity?

Also, it's pretty clear that only wealthy societies can affort environmentalism. Starving people don't care.

Lee Crawfurd said...

**BUT WAIT** - Back at the original blog, he’s now included a GDP/Capita **CONTROL VARIABLE** That’s science folks.