Correlation & Causality
The human understanding supposes a greater degree of order and equality in things than it really finds. ~ Francis Bacon
The inclination to impute order is built into the human mind: finding patterns is one of the mind’s favorite pastimes.
While the predisposition to patterns and connections leads to discovery, it also creates a strong bias to see correlation from coincidence and causality from correlation. This creates the basis for judgments and decisions from faulty information.
Randomness is a difficult notion for people to accept. When events come in clusters and streaks, people look for explanations and patterns. They refuse to believe that such patterns – which frequently occur in random data – could equally be derived from tossing a coin. So it is in the stock market as well. ~ American economist Burton Malkiel
We can exploit predictable phenomena. Randomness bestows no such leverage. Hence the inclination to see order where none exists.
The innate proclivity to find relations is a primary vehicle for learning, as associations are the basis for augmenting facts into a framework of knowledge. The drawback to this inclination is the difficulty in assimilating novel facts or new paradigms.
Learning new schemas becomes more difficult with age, as experience cumulates. That is why radical discoveries and innovations are so often the province of the young, whose minds are not so vested in convention, even if convention is only of one’s own making.
Associative connection between events is strengthened when the events repetitively co-occur. Coincidence is discounted as correlation is strengthened. If one event precedes another, causality is foisted upon correlation, especially if some linkage can be conceived.
Our difficulty in accurately recognizing random arrangements of events can lead us to believe things that are not true – to believe something is systematic, ordered, and “real” when it is really random, chaotic and illusory. ~Thomas Gilovich
In coming to a conclusion of causality over repeated coincidences, invisible intermediaries are easily ignored. This is part of the mind’s inherent dislike of complexity in favor of simple linkages.
Causality commonly comes from counterfactual simulation. The mind imagines what might have been had the suspected causal agent not intervened. What did not happen is how we attribute what did happen.