Yet Another Causation Confusion – School Ratings and Home Forclosures

Here is the headline from WSJ,

One Antidote to Foreclosures: Good Schools

The article is based on  data mining by Location Inc, that found that

over past six months percentage of foreclosure (or “real-estate-owned”) sales went down as the school ranking went up in five metro areas

Next we see a news story attributing clear causation. This one is hard to notice for some as it appears to be longitudinal – reported over six month period. If it were a simpler cross-sectional study most will catch the fallacy right away.

First let me point out this is the problem with data mining – digging for nuggets in mountains of Big Data without an initial hypothesis and finding such causations.

Second school rating improvement could be due to random factors that coincide with lower foreclosure.

Third despite the fact that longitudinal aspect implies causation there are many omitted variables here – the common factors that are driving down foreclosure and driving up school rating.

School rating is not an independent metric. It relies not just on teacher performance  but also on parents. The same people who are willing to work with their kids are also likely to be fiscally responsible. Another controversial but a proven factor is the effect of genes on children’s performance.

Ignoring all these if we focus our resources on improving school ratings to solve foreclosure crisis, we will be chasing away the wolves that cause eclipses with loud noises.