Ed Dolan: The general election campaign is in full swing in Britain, and it seems it’s all about austerity. From London, The New York Times reports that the campaign revolves around a single issue: the economy, and whether its rebound is the result of an austerity policy championed by the Conservative-led government of David Cameron, or in spite of it.
Ed gets the ubiquitous scatter chart right, it shows crap about cause and effect on austerity. Scatter charts, by themselves, rarely show cause and effect unless the correlation coefficient accounts for almost all of the effects. Even if many the points line up, the residual may be part of the cause and effect and it will not be shown.
The other problem is the ill defined fiscal consolidation, it is generally the cycle adjusted deficit. The problem is that we have more than one cycle happening, some long some medium and some short.
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