Popular mistakes in reasoning about economic concepts

A fallacy is the use of invalid or otherwise faulty reasoning, or "wrong moves" in the construction of an argument. A fallacious argument may be deceptive by appearing to be better than it really is. Some fallacies are committed intentionally to manipulate or persuade by deception, while others are committed unintentionally due to carelessness or ignorance. The soundness of legal arguments depends on the context in which the arguments are made. An economic fallacy is one that misunderstands or misrepresents the principles of economics.


A-Scalping We van Gogh, by Sheldon Richman, Future of Freedom, Feb 1999
Explains the economics concepts of opportunity cost, money, prices and entrepreneurship, based on analysis of scalping of "free" tickets for a Van Gogh exhibit at the National Gallery
"The National Gallery, however, gave away about 2,000 tickets each day, good for that day only. Naturally, people lined up early. Some folks arrived as early as midnight, even though tickets were not given out until 10 o'clock. ... The fallacy underlying the prejudice against scalpers and their customers is the belief that the tickets are free. Of course, they are not. They cost hours waiting in line. The real cost of a ticket for any person is the value of the highest-ranking alternative use of those hours."
Related Topics: Entrepreneurship, Money, Prices
Economic Nationalism, Enemy of the People, by Sheldon Richman, 17 Nov 2006
Explains the benefits of free trade and the perils of protectionism and economic nationalism
"It is only when the ideology of nationalism — often a cover for special labor and industrial interests — is permitted to muddy clear economic thinking that common sense is tossed to the wind and obvious truths are traded for rank fallacies. As Bastiat taught, Robinson Crusoe would never shove a useful plank that has washed ashore back out to sea because the free good robs him of work. He doesn't have enough time to make all the things he wants, so the freed-up time represented by the plank is a windfall. Yet at the national level, people fall for that one all the time. For some folks, nothing could be worse than dumping."
Related Topics: Farming, Free Market, Free Trade
Frédéric Bastiat: An Annotated Bibliography, by Sheldon Richman, 2000
Opens with a biography, then discusses Bastiat's major works and concludes with a current perspective; includes short list of works about Bastiat and links to other sites
"Bastiat's first book, Economic Sophisms, is a collection of short essays showing with unparalleled imagination the fallacy of government intervention. ... The most famous essay in this work is 'A Petition,' in which the candle makers of France petition for relief from the 'ruinous competition of a foreign rival who works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price.' The rival? The sun. The remedy requested? The mandatory shuttering of all windows."
The Nature and Significance of Economic Education, by Israel Kirzner, The Freeman, Oct 1998
Explains why economic education of both the general public and politicians/legislators is needed and why a teacher, such as Mises, must remain scientifically detached (value free) even if passionate about the teaching goals
"One of the most pervasive fallacies in public opinion has been that of seeing the gain that one participant derives from a market exchange as having necessarily been extracted and subtracted from his partner in that exchange. After all, if I profit from an exchange with my neighbor, that profit can only have arisen from my neighbor’s presumed, corresponding, loss. It is of course an elementary economic insight, yet one often entirely missed, that my profit must, at least prospectively, be in fact accompanied, not by a loss to my exchange partner (as in a 'zero-sum game'), but by profit to him (a 'positive-sum game')."


Economic Fallacies
    by Frédéric Bastiat, 1848
Partial contents: Abundance-Scarcity - Obstacle-Cause - Effort-Result - To Equalise the Conditions of Production - Our Products are Burdened with Taxes - Balance of Trade - The Petition of the Candlemakers - Immense Discovery - Reciprocity
Economic Sophisms
    by Frédéric Bastiat, 1848
Partial contents: Physiology of Spoliation - Two Principles of Morality - The Two Hatchets - Lower Council of Labour - Dearness, Cheapness - To Artisans and Workmen - A Chinese Story - Post Hoc, Ergo Propter Hoc - The Premium Theft - The Taxgatherer

The introductory paragraph uses material from the Wikipedia article "Fallacy" as of 25 Nov 2018, which is released under the Creative Commons Attribution-Share-Alike License 3.0.