Zhiyi Song (Song)
Principles of Macroeconomics G03
Professor Jean-Pierre Mulumba
January 15, 2016
Summary of “Pitfalls to Sound Economic Reasoning” There are five common pitfalls to avoid when people are applying the economic perspective. The first one is biases. People usually bring their biases to the businesses. Government regulation is not always good for everybody’s economics. People should abandon their preconceptions of the economics, then they can avoid the pitfalls. The second one is loaded terminology. People get many information and loaded terminology from newspapers and broadcast media. Some people think that all the government workers are “mindless bureaucrats”,and all the high profits are “obscene”. Those wrong opinions make people far away from success. The third one is fallacy of composition. People should jump our of their own world to see the whole economics, so that people could get a better view and make good decisions. People should not let the fallacy confuse them. The fourth one is post hoc fallacy. Sometimes, people think event A is the cause of event B because A precedes B. But not all the situation are the same. There is an example that the Great Depression. Many people don’t think that the weaknesses in the economy caused the Great Depression, they think the stock market crash caused it. People should not look at the whole situation to find the cause of an event.The last one is correlation. Many people think that if variable X increases and Y also increases, it is increases in X cause increases in Y. That is not always correct. X and Y are two conjoint things, they have correlation between them, but not causation. Those are five common pitfalls to avoid when people are applying the economics perspective.