According to economist Thomas Sowell, there are four basic economic fallacies. The Zero Sum Fallacy, the Fallacy of Composition, the Chess-Piece Fallacy, and the Open-Ended Fallacy.
The Zero Sum Fallacy
This states that what is gained by X, is lost by Y. This is often used by politicians to pit one group against the other, the latest being the 1% (the very rich) against the 99% (the rest of us). It is indeed a fallacy since the 1% are the investor class, and we need investment and risk taking to make the economy grow. When it does, we all benefit. As John F. Kennedy pointed out, "A rising tide floats all boats". (emphasis mine)
The Fallacy Of Composition
This states that what is true of a part is true of the whole. We often see politicians passing legislation which benefits a special interest, and selling it to the public with arguments like, "it will create jobs". At times like this, we need to keep in mind Star Trek's Spock who stated, "The needs of the many outweigh the needs of the few". Special interest legislation is just the opposite. Case in point would be the trade barriers protecting the domestic sugar crop. As a result, the consumer pays substantially more for this product, and the products that use sugar.
The Chess-Piece Fallacy
This fallacy states that large scale grand plans can benefit individuals. China's Mao had a massive program called The Great Leap Forward in which central planners tried to manage a billion people. It was a disaster resulting in the mass starvation of millions of people. Unlike chess pieces, human beings have their own individual preferences, values, and plans, all of which conflict with the goals of any specific social plan. The problem is that usually the social planner's response to a failing program is "if at first you don't succeed, try, try again". This is a formula for disaster.
The Open-Ended Fallacy
Who could be against health, safety, or open space? But each of these things is open-ended, while resources are limited. No matter how much is done to promote health, more could be done. No matter how safe things are, they could always be safer. And no matter how much open space there is, there could still be more. Obvious as this may seem, there are advocates, movements, laws, and policies promoting an open-ended commitment to more of each of these things, without any indication of limits. Open-ended demands are a mandate for ever-expanding government bureaucracies with ever-expanding budgets and powers.
