Economics, 3rd Edition

Omitted Variables 

To see how omitting a variable can lead to a deceptive graph, let’s consider an example. 

Imagine that the government, spurred by public concern about the large number of deaths from cancer, 

commissions an exhaustive study from Big Brother Statistical Services. Big Brother examines many of the 

items found in people’s homes to see which of them are associated with the risk of cancer. Big Brother 

reports a strong relationship between two variables: the number of cigarette lighters that a household 

owns and the probability that someone in the household will develop cancer. Figure 2A.8 shows this 

relationship.