128 PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA - 
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causal connection must therefore exist, the question naturally 
arises of why it must be one in which the instrumental variables. 
cause the included ones. If correlation is all that matters, 
surely the causal link might be reversed or both variables in- 
flunced by a common third one. 
This is not the case. Consider first the situation in which 
the proposed instrumental variable is caused in part by vari- 
ables included in the model. To the extent that this is the 
case, no advantage is obtained by using the proposed instru- 
mental variable over using the included variables themselves. 
Obviously, the included variables are more highly correlated 
with themselves than with the proposed instrument. Further, 
correlation with the disturbances will be maintained if the pro- 
posed instrument is used. To the extent that the proposed 
instrument is caused by variables unrelated to the included 
variables, correlation with the disturbances will go down, but 
so also will correlation with the included variables. 
The situation is similar if the proposed instrumental variable 
and one or more of the included ones are caused in part by 
a third variable. In this case, it is obviously more efficient to 
use that third variable itself as an instrument, and, if this is 
done, no further advantage attaches to the use of the proposed 
instrumental variable in addition. (The only exception to this 
occurs if data on the jointly causing variable are not available. 
In such a case, the proposed instrument could be used to 
advantage.) 
In general, then, an instrumental variable should be known 
to cause the included variables in the equation, at least indi- 
rectly. The closer is such a causal connection the better. As 
can easily be seen from our discussion of block-recursive 
systems, however, in many cases the closer is that connection 
the greater the danger of inconsistency through high correla- 
tions with the relevant disturbances. In such systems, for 
example, current endogenous variables in low-numbered sectors 
directlv cause current endogenous variables in high-numbered 
‘61 Fisher - pag. 44