Economic Facts and Fallacies summary

You might have heard of the Latin term post hoc. It comes from the full sentence post hoc ergo propter hoc, which means “After this, therefore because of this.”

Or, more simply, since Y followed X, Y must have been caused by X. This is, of course, a fallacy – commonly referred to as the post hoc fallacy.

Here’s a statement: we should improve healthcare. How many people would disagree? Very few, if any.

But let’s take a closer look. What does improving healthcare actually mean? Is it about pouring billions of taxpayers’ money into cancer research? Or spending that same money to fight skin rashes?

If somebody says to you “The door to the house is made of wood, therefore the whole house must be made of wood,” they’re obviously wrong. It’s what logicians call the fallacy of composition. This is the belief that what’s true of the part is also true of the whole.

This is how it plays out in politics: governments support a particular group, city, or industry and expect such steps to improve things for everyone. They pay special attention to the part but they neglect the whole.

Imagine a business with a product that’s baffling and useless to most people – let’s say a windup frog that does absolutely nothing. Such a business wouldn’t last very long – in no time at all the company would go bankrupt. But before that moment came, it’s likely that the board of directors and the shareholders would intervene and force the CEO to turn things around.

There’s a part of the world which doesn’t work like that: academia. It’s not subject to the same pressures and incentives. And that’s a problem.

The American satirist and writer Mark Twain said there were three kinds of lies: “Lies, damned lies, and statistics.” What exactly did he mean by this? Essentially, statistics can be used to mislead, especially if data is used without context.

In politics, statistics are often cited to demonstrate how unequal the world is. But it’s not all so black and white.

How Europe Undeveloped Africa is the name of an influential book by the Guyanese historian and activist Walter Rodney. Captured in that title is the idea that Europe exploited Africa – and is, therefore, to blame for the continent’s poverty.

The idea that rich countries impoverished poorer parts of the world stretches beyond just Africa and Europe. For instance, Indian poverty is blamed on British colonial rule, and troubles in South America are linked to actions of the US and Canada. The author, however, argues that this is a simplistic interpretation of events and that there are other causes of poverty.