Copyright

Common Logic Pitfalls in Economics

Common Logic Pitfalls in Economics
Coming up next: Microeconomics vs. Macroeconomics

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:01 Causation vs. Correlation
  • 1:29 Bias and Loaded Terminology
  • 3:09 Other Fallacies
  • 4:51 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Timeline
Autoplay
Autoplay
Speed

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught middle and high school history, and has a master's degree in Islamic law.

Economics is a pretty straightforward subject, but it can be plagued with plenty of logical pitfalls. This lesson discusses swimsuits, mansions, and politicians to explain some of the most common logical fallacies.

Causation vs. Correlation

What would you say if I told you that people buying more ice cream causes people to wear swimsuits more often? You'd probably give me a funny look. However, if you look at the numbers, it seems to make sense. When ice cream sales go up, people tend to spend more time in swimsuits. But does that mean that the increased consumption of ice cream causes people to wear swimsuits more often?

In a word, no. What you've just seen here is an example of a logical fallacy that economists often encounter. Again, when you look at the numbers, it makes sense. However, the reason that you see more people in swimsuits during times of increased ice cream sales has nothing to do with the ice cream. In fact, it has everything to do with the time of year people buy ice cream. In the summer, people spend time in swimsuits and people eat ice cream. They do both because the weather is hot. The hot weather causes increased ice cream consumption as well as more people to wear swimsuits.

As a result, we call this sort of relationship causation, because one action clearly causes the other. The relationship between ice cream sales and swimsuit sightings is, instead, a correlation, which means the compared items mirror each other but may not have anything to do with actual causality.

Bias and Loaded Terminology

Okay, that was an easy one. However, economists still have to contend with other logical issues. Much of an economist's work depends on the accurate collection and portrayal of data. That said, it is not always that easy. People sometimes introduce bias, whether knowingly or unknowingly, that can change the data set. A bias occurs when the model in question is somehow shaped by what the economist wants to find.

For example, if I'm trying to model at what temperature water freezes and want to prove that water can't freeze, bias would be blatant if I kept the water boiling and just assumed that cold water doesn't freeze. It's a bit more subtle if I put it in the refrigerator and just assume that if water freezes, then it must freeze in the fridge.

But it's not always through overt design that biases are introduced. One of the biggest fallacies faced by economists is the use of loaded terminology, or words that carry a meaning beyond their mere definition. This is most often used by politicians to get an emotional response, especially when talking about things like 'our jobs,' 'our money,' or 'our healthcare,' but it can be abused by the innocent as well.

For example, if I asked if you had a comfortable lifestyle, you may consider that as shelter, a warm bed, and enough money after all your bills are paid to get pizza and beer on Friday night. However, what if your idea of comfortable involved a large mansion, a private pool, and a butler? Both use the same word but have a world of difference in meaning.

Other Fallacies

Other stumbling blocks exist as well. Closely related to the difference between causation and correlation is the idea of post hoc ergo propter hoc, a Latin phrase that roughly means since something came first, it caused something else afterwards.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account
Support