Economics for Today 9th Edition by Irvin Tucker

Exercise 50

MOPS AND BROOMS, THE BOSTON SNOW INDEX, THE SUPER BOWL, AND OTHER ECONOMIC INDICATORS
Applicable Concept: association versus causation
Although the Commerce Department, the Wharton School, the Federal Reserve Board, and other organizations publish economic forecasts and data on key economic indicators, they are not without armchair competition. For example, the chief executive of Standex International Corporation, Daniel E. Hogan, reported that his company can predict economic downturns and recoveries from sales reports of its National Metal Industries subsidiary in Springfield, Massachusetts. National makes metal parts for about 300 U.S. manufacturers of mops and brooms. A drop in National's sales always precedes a proportional fall in consumer spending. The company's sales always pick up slightly before consumer spending does.
The Boston Snow Index (BSI) is the brainchild of a vice president of a New York securities firm. It predicts a rising economy for the next year if there is snow on the ground in Boston on Christmas Day. The BSI predicted correctly about 73 percent of the time over a 30-year period. However, its creator, David L. Upshaw, did not take it too seriously and views it as a spoof of other forecasters' methods.
Greeting card sales are another tried and true indicator, according to a vice president of American Greetings. Before a recession sets in, sales of higher-priced greeting cards rise. It seems that people substitute the cards for gifts, and since there is no gift, the card must be fancier.
A Super Bowl win by a National Football Conference (NFC) team predicts that in the following December the stock market will be higher than the year before. A win by an old American Football League (AFL) team predicts a dip in the stock market.
Several other less well-known indicators have also been proposed. For example, one economist suggested that the surliness of servers is a countercyclical indicator. If they are nice, expect that bad times are coming, but if they are rude, expect an upturn. Servers on the other hand, counter that a fall in the average tip usually precedes a downturn in the economy.
Finally, Anthony Chan, chief economist for Bank One Investment Advisors, studied marriage trends over a 34-year period. He discovered that when the number of marriages increases, the economy rises significantly, and a slowdown in marriages is followed by a decline in the economy. Chan explains that there is usually about a one-year lag between a change in the marriage rate and the economy.
Which of the above indicators are examples of causation? Explain.