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REFERENCE WEEK: The calendar week (Sunday through Saturday) containing the 12th day of the month, which is used in the Current Population Survey (CPS) as the time period for documenting the employment and labor force status of respondents. The estimation of the unemployment rate and other employment information generated by the CPS are based on activities of survey respondents during this week. The actual survey is conducted by interviewers working for the Bureau of the Census during the calendar week containing the 19th day, which is termed the survey week.
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                           FALLACY OF COMPOSITION: The logical fallacy of arguing that what is true for the parts is also true for the whole. In the study of economics, this takes the form of assuming that what works for parts of the economy, such as households or businesses, also works for the aggregate, or macroeconomy. The contrasting fallacy is the fallacy of division. The fallacy of composition is important to the study of macroeconomics. Many, otherwise intelligent-looking folks, commit this fallacy when the subject of macroeconomic policies arise. The macroeconomy, for instance, is not a business, it is not a household, it is not a family, it is NOT a microeconomic entity. It is THE ECONOMY. It has its own set of principles, its own set of rules, its own theories. Treating the macroeconomy like a business or household commonly leads to the fallacy of composition.A common macroeconomic argument that makes use of the fallacy of composition is to treat the economy as if it were a household or a profit-minded business. An offshoot of this argument is to operate the Federal government (the "caretaker" of the aggregate economy) as a household or a profit-minded business. Some folks are prone to argue that economic ailments would vanish if only government operated like a business. For example, during economic bad times (recession), the appropriate action of a profit-minded business is to lay off workers and reduce production. The reasonable action by a household is to reduce spending and set aside, or save, some income for the turbulence to come. Both of these actions, if undertaken by the macroeconomy, or promoted by government policies, would likely turn a modest recession into a devastating depression. The macroeconomy is a complex system comprised of smaller components. An analogy is the human body. Individuals and firms make up the macroeconomy like cells and molecules make up the human body. Rules that apply to cells do not apply to the entire body. Rules that apply to firms do not apply to the entire macroeconomy. What is true at the microeconomic level is not necessarily true at the macroeconomic level. What is true for the parts is not necessarily true for the whole.
 Recommended Citation:FALLACY OF COMPOSITION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: March 25, 2023]. Check Out These Related Terms... | | | | | | | Or For A Little Background... | | | | | And For Further Study... | | | | | | | | |
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Post WWI induced hyperinflation in German in the early 1900s raised prices by 726 million times from 1918 to 1923.
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"Success is the ability to go from one failure to another with no loss of enthusiasm." -- Sir Winston Churchill
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CPI Consumer Price Index
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