Causation vs. Correlation
Causation and correlation are two very close terms and are often confused in economic matters. If one mistakes correlation for causation it could lead to an extreme misleading. Causation means that one thing causes another, for example, not eating causes hunger. It is a natural body function to get hungry when you haven't eaten in a while, therefore if you dont eat, you will get hungry, this is a good example of causation. Correlation means that there is a strong connection between two events or actions. For example, often times smoking is related to alcoholism for many reasons, people who have addictive personalities are more likely to be addicited to multiple substances, and when people are at bars drinking, they are around more smokers thus are more likely to smoke. However, alcoholism does not cause people to smoke, neither does smoking cause alcoholism, they are simply correlated.

One classic example of a mistake between causation and correlation is about the superbowl and sewers backing up. Every year at halftime of the superbowl sewer systems across the country back up. However, the superbowl is not the cause of the sewers backing up. The causation of the back up is that at halftime, everyone gets up to go to the bathroom at the same time. The superbowl is simply correlated to the sewer backup.


corelation_vs_causation.gif
Billy thinks that the seatbelt sign is causing the turbulence, but in reality, the two are merely correlated.




Here Joey thinks that getting a new roommate is the cause of his fridge breaking down, however they just happened at the same time or are correlated

Links
What's the difference?C vs C Examples
Wikipedia

Practice problem: John spilt water on the floor and then he hit his head on on the floor, the cause of him hitting his head on the floor is him spilling water. True or False?

False, the cause is that he slipped on the water the fact that he spilt water is just correlated to him hitting his head.