Economic Facts and Fallacies is a clear and understandable exposition of some of the widely believed economic principles that do not happen to be true. Following these principles leads to unnecessary hardship and inefficiencies in our economy.
The first chapter presents four general types of fallacies, and then the rest of the book presents specific examples in six areas. The examples are numerous and interesting. Most discussions are fairly short and simple, but they make powerful points.
Relationship to the ComingTogether Plan: The ComingTogether Plan attempts to avoid economic fallacies by giving careful consideration to the whole economy. Let’s look at the four types of fallacies and see how they are avoided in the ComingTogether Plan:
- The “zero-sum fallacy” is the assumption of a fixed size economic pie, so if one person gets a larger piece, at least one other person will end up with less. This ignores the fact that the size of the economy changes. The efficiency and fairness embedded in the ComingTogether Plan will grow the economy when it is implemented.
- The “fallacy of composition” from logic is basically improper use of inductive reasoning. In economics, it shows up as proposals to do good for one group and acting if it must be good for all groups, or at least not harmful to any group. Many of the specific examples in Economic Facts and Fallacies point out cases where this is not true. The ComingTogether Plan looks beyond any one group in large part by not picking out specific groups for special treatment, reducing the chance that any particular group might be harmed. The major exception is the contention that the government has a first responsibility to its citizens; therefore the ComingTogether Plan greatly reduces benefits to non-citizens. We recognize that non-citizens will be less well cared for, but we believe that will rectify the government’s past failure to focus on its own citizens. We also recognize that taxes will go up for those who had previously found loopholes to significantly reduce their taxes. Those people may complain initially, but fairness is a goal most will agree on. Besides, getting the economy back on track should improve incomes, perhaps enough to cover the higher taxes in these situations.
- The “chess-pieces fallacy” is the belief that the economy can be managed by a wise elite with the government micromanaging the details of the people’s lives. Government tends to provide one-size-fits-all solutions that do not account for the “preferences, values, plans, and wills” of the various individuals. The ComingTogether Plan is specifically designed to preserve freedom, both in how the benefits are used and in how money is earned.
- The “open-ended fallacy” advocates public funding of desirable things no matter what the cost. There are good things which could always absorb more resources than currently allocated. For example, there is no limit to the amount of resources that can be consumed by health care. Who opposes the concept of health care? Promoting good health care is certainly desirable. The ComingTogether Plan assures citizens the resources to provide basic needs (or desires), but limits the cost to government, in order to avoid unlimited expenditures on ‘good’ things.
This book provides training in how to look at economic proposals and think through the consequences of them. It should allow voters and politicians the ability to make better decisions.
Economic Facts and Fallacies is very well written, and easy to understand. It is amazing how many examples are included of policies implemented with good intentions, but which went terribly wrong. We recommend it to every voter so that they can become better able to evaluate proposals and positions of candidates.