Question

In decades past, economists used to joke that the stock market went up and down with the length that the fashion world prescribed for women’s skirts; if the stock market went down, skirts were worn longer. What kind of reasoning were they using?

Answer 1

Economists used correlation or coincidental reasoning to make a connection between the length of women's skirts and the stock market's performance, suggesting that the two were somehow linked. However, this was not a reliable method for predicting stock market trends.

Step-by-step explanation:

Economists in decades past used a form of reasoning called correlation or coincidental reasoning. They made a connection between the length of women's skirts and the performance of the stock market. The idea was that if the stock market went down, skirts would be worn longer and vice versa. However, this was a humorous observation and not a reliable method for predicting stock market trends.

Answer 2

The joke about stock market trends correlating with skirt lengths showcases spurious correlation and exemplifies superstitious reasoning, not grounded in the complex factors that actually drive market movements.

Step-by-step explanation:

The joke about the stock market trends following the length of women's skirts is an example of spurious correlation. It attributes a causal link between two variables that likely do not have a direct cause-and-effect relationship. Instead, it might reflect a particular period's sentiment or cultural attitudes that coincidentally align with market trends. This reasoning could be classified as superstitious or post hoc ergo propter hoc ('after this, therefore because of this') logic, where two events that occur in sequence are mistakenly believed to be related causally.

In reality, economists understand that market movements are driven by a complex set of factors, including corporate profits, investor sentiment, geopolitical events, economic data, and more. These factors can influence the market directly and indirectly but rarely ever in the whimsical and simplistic manner suggested by such analogies. While the comparison is playful, it serves as a cautionary tale for understanding the multifaceted and sophisticated nature of financial markets, which cannot and should not be reduced to such superficial trends.