Economic Fallacies

The Fallacy of Composition

  •  What is true for an individual in not necessarily true for the economy as a whole
  •  What is good/bad for an individual is not automatically good/bad for society as a whole.
  • Example: Higher food prices are a problem for all Canadians.


The Post Hoc Fallacy

  •  Derived from Latin phrase post hoc ergo propter hoc “after this therefore because of this”
  •  As known as the ‘Cause and Effect’ Fallacy
  •  Just because event A happened before event B, it doesn’t mean that event A caused event B
  •  The relationship between two things may be coincidence instead of cause and effect.
  • Example:  The government passed a law lowering taxes and the crime rate decreased; therefore, the decrease in taxes led to lower crime.


The Fallacy of Single Causation

  •  You cannot assume that a single factor caused something to happen.
  • Example: The stock market crash of 1929 caused the great depression.

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