fallacy of composition


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fallacy of composition

an error in economic thinking that often arises when it is assumed that what holds true for an individual or part must also hold true for a group or whole. For example, if a small number of people save more of their income, this might be considered to be a ‘good thing’ because more funds can be made available to finance investment. But if everybody attempts to save more, this will reduce total spending and income and result in a fall in total saving. See PARADOX OF THRIFT.
References in periodicals archive ?
That last part is risky because by trying to belong to too many things at once you end up belonging to none (see my comments on the BMW X6 as an analogy of this fallacy of composition).
And the more this set of investors grows, the larger the potential fallacy of composition (that is, what makes sense for some does not make sense for all), especially when applied to markets that lack structural liquidity (such as segments of high-yield and emerging markets).
First, the fallacy of composition entails that system-level outcomes are not simply the sum of all of the decisions taken by the individual actors who comprise the economy.
In fact, the problem with virtually all of the "robots are taking our jobs" claims is that they suffer from the fallacy of composition. Proponents look at the jobs that are relatively easy to automate (e.g" travel agents) and assume that: (1) these jobs will all be automated quickly, and (2) all or most jobs fit into this category.
Indeed, there is a "fallacy of composition" in the current approach: The countries in need of serious adjustment and improved competitiveness include the whole of Southern Europe and France, and jointly account for more than half of eurozone GDP.
To say otherwise is to commit the fallacy of composition, as we would be confusing the collective and the distributive forms of a word.
Fallacy of composition: Arguing that what is true of the parts must also be true of the whole.
But when a large number of economies in the region are engulfed in balance sheet recessions at the same time, and if all of them must abide by the Maastricht limit, a fallacy of composition problem is created which will push the entire region into a deflationary spiral.
Teachers of macroeconomics are quick to point out the fallacy of composition: incorrectly inferring that what is true for the individual is true for the economy.
Searle argues that this objection involves a fallacy of composition, confusing the properties of a system with those of its parts.
The only successful challenge from within this basic model focused on the problem of the fallacy of composition and, accordingly, the need to consider the importance of the whole.
is a classic example of the fallacy of composition" and proceed to investigate this contention within each of four theoretical arguments that have typically been used to support the negative slope of the aggregate demand curve.