There’s a unexpected mathematics in charge of certain types of operations in real life. To wit, a sum of pluses can equal a negative. A combination of individual events of positive consequence can add up to an aggregate event that is of negative impact.
Positive + positive + positive + … = negative
That doesn’t sound like the old math, 1+1 = 2, does it?
Let’s consider three examples from everyday society which displays this anomalous behavior..
One wheat farmer growing an extra bushel raises his income by the price of a bushel.
If every wheat farmer growing an extra bushel, the value of each bushel of wheat falls.
Each farmers can end with a smaller income.
If one person doesnÆt pay their taxes, the government will does not grind to a halt. Services continue, but that one person is better off with more cash in their pocket. When you and I see them prospering by tax avoidance, we may decide to do the same. However, when many people do that, services from the government falter.
One person avoiding taxes, benefits them and doesn’t harm others. When all people do the same, the loss of government services is severe.
If one person litters, someone else in the neighborhood picks up the litter. If multiple people litter, the task becomes daunting. The others despair of ever finishing the cleanup. The neighborhood deteriorates. The first person gains the freedom of not having to cleanup their own mess.
A similar logic drove the broken window argument which underlay the NYC police attention to small crimes, successfully resulting in increased neighborhood self-regulation and dramatically lower crime rates.
The basic concept is that there are a large number of people who are part of the system and an individual action does not affect the system, while many individual actions in aggregate will affect the system.
Formally, this is called a fallacy of composition: the error of assuming that what is true of a member of a group is true for the group as a whole. That definition is cold and abstract, thus this post provides some examples. Next, let’s consider economics where both the fallacy of composition and Adam Smith’s Invisible Hand operate.
The Invisible Hand holds that the market aggregates individual needs into socially beneficial results. Yet with the fallacy of composition, we have seen three cases where individual actions lead to negative consequences for the group.
These represent a limitation to the market’s Invisible Hand, summing individual selfishness into a society good.