Re: City of Beijing announces Job Gaurantee

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

On Sat, 06 Apr 2002 11:03:27 -0800, John O'Donnell
<jackodonnell@xxxxxxx> wrote:

>I ask again - Can you provide some specifics of the pitfalls
>you see?

[offlist]

> 1.The parts of the whole X have characteristics A, B, C, etc.
> 2.Therefore the whole X must have characteristics A, B, C.
> That this sort of reasoning is fallacious because it cannot
> be inferred that simply because the parts of a complex whole
> have (or lack) certain properties that the whole that they
> are parts of has those properties.

This is the fallacy of composition that comes back to bite
people when they replace a complex system of firms with a
representative firm analysis.  In the mainstream of economic
modelling that John's analysis lies within, there are two
solutions:

(1) Ignore the problem.
(2) Represent the system of the whole as a general
equilibrium system, which amounts to replacing the
problem with one that is more convenient to solve.

This is all in the GT literature (see the Cambridge
Controversies for heaps of examples, or Keen's
Debunking Economics) and presented in the literature
better than I can do, so I'll leave this here.


Virtually,

Bruce McFarling, New Lambton, NSW
ecbm@xxxxxxxxxxxxxxxxxxx