Economic Facts and Fallacies

A Fount of Fallacies

In one old joke, two friends are talking on a busy street corner in Manhattan. Noticing the frenetic traffic, one recounts some statistics he just heard. Apparently, he says, a man gets hit by a car in the city every 20 minutes. “Oh dear,” says the other friend, “he must get awfully tired of that.” Like many jokes, this one contains a subtle truth. That truth, often overlooked in news stories recounting statistical data, is this: Membership in a group (the man) often changes even though the group (“a man”) retains the same characteristic.

This construct, which might be called the “fallacy of changing composition,” is just one of many reasoning patterns that are apt to lead even the cleverest people into mistakes unless they are careful. A related fallacy is the “fallacy of sameness,” which assumes that the members of a statistical category are the same in most respects, if not all. For example, generalizing about incomes of 18- to 24-year-old young men is easy. But in this category some are college grads and some are high school dropouts. When considering policy issues, that difference could be crucial.

While many economic fallacies exist...