I’m at my computer. I’m drinking tea. I’m going to briefly review the first chapter of Thomas Sowell’s Economic Facts and Fallacies.
The Zero-Sum Fallacy
The assumption that only one person gains in a voluntary transaction of two individuals. Sowell explains that voluntary transactions would not occur unless both people were gaining something in the process. Though, he then points out areas where government policy has intervened in these transactions. The results have been fewer terms being available for such transactions or the elimination of the transactions themselves. Rent Control in Egypt, Hong Kong, New York, and Stockholm have resulted in housing shortages.
The Fallacy of Composition
This is the belief that what is true of a part is true of a whole. His great example: “A baseball fan can see better by standing up but, if all the fans stand up, they will not all see better.”
The economic example can be a little more complex. Revitalization projects by local governments intended to improve communities don’t necessarily improve the community as a whole or the entire economic situation of the city. Money is collected by tax payers that would have been spent in one way is merely collected to be spent in another. Often this results in population movements. The poor move from the area being developed and a higher class is moved in.
The Chess-Pieces Fallacy
(He) who is wise in his own conceit seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board.
The thought that politicians may believe that they are so wise they can merely change society by shaping laws and policies. Social experiments are conducted with the idea that they are going to make peoples lives better. However, it is often overlooked that human beings have their own individual preferences. There own plans for their own lives that may be interfered with by constant government meddling of society.
John Maynard Keynes, the popular opponent of the Austrian school, is cited as “seeing the uncertainties about the future generated by the experimental policies of the New Deal administration in the 1930s as tending to discourage investment that was much needed to get out of the Great Depression.” The idea that the New Deal prolonged the Great Depression is expressed by Tom Woods as well in “the Politically Incorrect guide to American History.”
“People are not inanimate objects.”
The Open-Ended Fallacy
Thomas Sowell states “the most fundamental fact of economics is that resources are scarce and have alternative uses (which are also valuable)”
Health, Safety, and Open space are all examples of things which are Open-Ended. There are movements and plans that seek to address each of these issues without any consideration that there is a limit in which you can address each of these things. At least in regards to efforts by governments. You cannot simply devote all resources to addressing all health problems when the resources that used by healthcare have other uses besides that.
The Post Hoc Fallacy
Better understood as “After this, therefore because of this”
If A occurs after B has occurred, then A is a result of B.
Sowell explains that it was believed for a while that the Great Depression or the collapse of the entire economy was a result of stock Market crash in 1929. However, a similar crash occured in 1987 which results in 20 years of economic growth. Unemployment peaked at 9 percent after the stock market crash of 1929. Unemployment actually went down to 6.3 percent before the government decided to implement it’s first major intervention known as the Smoot-Hawley tariff, the second highest increase of tariffs in 100 years and resulted in other countries raising their own tariffs against the United States.