Instrumental Variable
A variable used in causal inference to estimate the causal effect of an input when there is hidden confounding between the input and the target outcome.
Think of It Like This
Like using weather patterns to study the effect of fish supply on prices, since weather affects supply but not demand directly.
An instrumental variable must be correlated with the treatment but have no direct effect on the outcome except through that treatment. It isolates the variation in the treatment that is free from unobserved confounders. This technique is widely used in economics and epidemiology to uncover true causal relationships from observational data.