On the relationship between energy and development: A comprehensive note on causation and correlation.

[1,2] are two highly cited studies on the relationship between energy and development. These are two seminal empirical papers touching upon the notions of causation and correlation , respectively, as far as energy economics is concerned. This study is a comprehensive note on these notions' interconnectedness by revisiting both studies thoroughly and globally. None of these studies has ever been revisited at a global scale to the best of our knowledge. To this end, we first review deeper conceptual and philosophical concerns towards causation and correlation for making a clear distinction between true and spurious causation/correlation. We then develop a novel method to exclude spurious measures from the true ones. We also statistically test several hypotheses regarding the relationship between energy use and wealth creation as captured by income groups. We could not confirm a definite consistency in pair-wise causation between energy and welfare variables at the country levels and across distinct estimation periods. Nor could we denote any strong correlation between energy variables and wealth creation. Causation results are not surprising as previous studies asserted similar remarks. However, this study firmly says that these are mainly due to the circularity and non-linearity of the inter-relationships between energy and welfare variables over time, as new institutions might influence development processes. • Analysis of energy-welfare nexus by interconnected causation & correlation notions. • Making a novel distinction between spurious and true causation/correlation. • Identifying significant numbers of spuriosity and illusions in observed measures. • Rejecting any significant difference in correlation coefficient across income groups. • Revealing the cyclical dynamics of energy-welfare nexus through transition-matrices. [ABSTRACT FROM AUTHOR]