by Simpson’s paradox and the limits of econometrics [embedded content] From a more theoretical perspective, Simpson’s paradox importantly shows that causality can never be reduced to a question of statistics or probabilities. To understand causality we always have to relate it to a specific causal structure. Statistical correlations are never enough. No structure, no causality. Simpson’s paradox is an interesting paradox in itself, but it can also highlight a deficiency in the traditional econometric approach towards causality. Say you have 1000 observations on men and an equal amount of observations on women applying for admission to university studies, and that 70% of men are admitted, but only 30% of women. Running a logistic regression to find out the
Topics:
Lars Pålsson Syll considers the following as important: Statistics & Econometrics
This could be interesting, too:
Lars Pålsson Syll writes What statistics teachers get wrong!
Lars Pålsson Syll writes Statistical uncertainty
Lars Pålsson Syll writes The dangers of using pernicious fictions in statistics
Lars Pålsson Syll writes Interpreting confidence intervals
Simpson’s paradox and the limits of econometrics
From a more theoretical perspective, Simpson’s paradox importantly shows that causality can never be reduced to a question of statistics or probabilities.
To understand causality we always have to relate it to a specific causal structure. Statistical correlations are never enough. No structure, no causality.
Simpson’s paradox is an interesting paradox in itself, but it can also highlight a deficiency in the traditional econometric approach towards causality. Say you have 1000 observations on men and an equal amount of observations on women applying for admission to university studies, and that 70% of men are admitted, but only 30% of women. Running a logistic regression to find out the odds ratios (and probabilities) for men and women on admission, females seem to be in a less favourable position (‘discriminated’ against) compared to males (male odds are 2.33, female odds are 0.43, giving an odds ratio of 5.44). But once we find out that males and females apply to different departments we may well get a Simpson’s paradox result where males turn out to be ‘discriminated’ against (say 800 male apply for economics studies (680 admitted) and 200 for physics studies (20 admitted), and 100 female apply for economics studies (90 admitted) and 900 for physics studies (210 admitted) — giving odds ratios of 0.62 and 0.37).
Econometric patterns should never be seen as anything else than possible clues to follow. From a critical realist perspective, it is obvious that behind observable data there are real structures and mechanisms operating, things that are — if we really want to understand, explain and (possibly) predict things in the real world — more important to get hold of than to simply correlate and regress observable variables.
Math cannot establish the truth value of a fact. Never has. Never will.