“90 percent of the variation” is misleading when comparing the levels of one time-series against another. It’s very easy to find two time-series that regress almost perfectly on one another because both steadily increase. Looking at first-differences is more informative about possible causal relations. The image Cyan posted is effectively two data points from a first difference perspective: both went up and then both went down.
Another graph from Nevin’s website is slightly more persuasive:
There you can see 4-6 corresponding changes in trend. Still not that impressive, but maybe enough to start looking more closely.
“90 percent of the variation” is misleading when comparing the levels of one time-series against another. It’s very easy to find two time-series that regress almost perfectly on one another because both steadily increase. Looking at first-differences is more informative about possible causal relations. The image Cyan posted is effectively two data points from a first difference perspective: both went up and then both went down.
Another graph from Nevin’s website is slightly more persuasive:
There you can see 4-6 corresponding changes in trend. Still not that impressive, but maybe enough to start looking more closely.
Interesting to see the murder rate stay almost flat through the 2000s even as lagged lead use plummets by 80% or so.