Sunday, September 20, 2009

Fallacy of Composition

One of the key traps to thinkig economically is assumin gthat the total economic impact of something is always and simplyy equal to the sum of the individual parts.

Imagine a cake. Now imagine the ingredients that go into making the cake. Imagine eating the cake and the satisfaction you get from that. Now campare that level of satisfaction to what you would have if you separately poured flour, sugar, and baking powder down your throat, washed it down with a couple of raw eggs and some cooking oil, and then stuck your head in an oven. The baked combination is obviously better than its individual parts.

The two can be, and often are, different.
more click: issues in economics today guell 4th edition

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