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Very often, economists disagree because, as Henry Hazlitt has so succinctly put it, "Economics is haunted by more fallacies than
any other study known to man". Is there such a thing as "bad economics?" You bet there is, just as surely as there is good
plumbing and bad plumbing. If one means by "bad economics" the promotion of false reasoning, mistaken assumptions, and
shoddy intellectual merchandise, then Hazlitt's comment ought to be enshrined as a law!
It may be an oversimplification, but the essence of "bad economics" can be distilled into the undermentioned fallacies. Each of
them is a pitfall, which the good economist will faithfully bypass.
Fallacy of Subjectivity:
Most of generalizations in economic analysis are based on a set of assumptions. Some of these assumptions are sometimes stated
explicitly, and some implicitly in terms of phrases like ‘other things being equal’. Some of these assumptions are factual
statements, some are anti-factual or counter factual. As such, the interferences which are drawn from the set of assumptions can
at best be described as tentative hypotheses, subject to qualifications. The conclusions from economic analysis are, therefore,
probabilistic rather than deterministic. Those conclusions may be true. There is no certainty that they must be true. For example, a
statistical inference will hold true provided the sample size is sufficiently large and reliable. An economic theory will hold valid
provided assumptions on which it is based are more realistic and less restrictive. However in most of the arguments, the
propositions of economic analysis are accepted at their face value, without paying much heed to the nature of the underlying
assumptions. The result is probabilistic statements sell as deterministic ones. Consider this: workers often ask for high and higher
wages to compensate the increasing costs of living during periods of inflation. But wage increase may or may not compensate the
rising costs of living depending on whether or not workers maintain their productivity. If this productivity assumption does not
obtain, workers demand makes no sense. Thus, fallacious reasoning results from failure to unearth the underlying assumptions of
economic analysis.