The Fallacy of Composition

The fallacy of composition is a fundamental fallacy of reasoning or thinking and it arises when we infer that just because something is true of some part of a whole (or every part of a whole), it is also true of the whole.

Put another way, the fallacy of composition arises when we infer that something is true of the whole just because it is true of some part (or every part) of the whole.

If the above semi-formal definition(s) are confusing, let us try to put it into even simpler terms. The fallacy of composition tells us that just because something is true of some part of something (or even every part of something), we cannot then automatically infer that the same thing is true of the entire thing.

The fallacy of composition is a common fallacy in various spheres including relatively primitive scientific endeavors, political and voting theory, and economics. In fact, there are many interesting examples of the fallacy of composition in economics.

Here are a few examples of the fallacy of composition economics:

• The Paradox of Thrift: Intense saving makes you better off, BUT if everyone in the economy saved intensely, a recession (or possibly a depression) could arise due to lower aggregate demand.
• The Tragedy of the Commons: You can profit by consuming a larger share of the “commons” (or common resource) than you should, BUT if everyone attempted to do the same, it is likely that the “commons” could be destroyed.
• The Free Riding Problem: You might benefit by free riding (consuming a public good without paying for it), BUT if everyone attempted to do the same, there would likely be no public good at all for anyone.

The fallacy of composition is more than just something that is interesting to think about – the fallacy of composition is a real error in thinking that has caused mistakes and misunderstandings throughout history. By understanding the nature of the fallacy and giving it a name, we might be able to be on guard against future fallacious and illogical thinking and be able to lead smarter lives both as individuals and as a society. For example, if we don’t understand as a society that extreme saving might not do for society as a whole what it does for an individual super-saver’s pocketbook, we might be able to create better policies and incentives – the kind of policies and incentives that benefit the whole society.