“Albertans work hard, pay their taxes, and live within their means – and they expect their government to do the same. Each and every day, Alberta families make prudent and responsible spending decisions and save money for future expenses. Sometimes, this means making the tough choice to delay spending decisions and foregoing some luxuries until they can afford them.
The Redford government could learn a lot from Alberta families…”
http://www.robanderson.ca/policy/wildrose-pledges
An argument that promotes balancing government budgets like a household budget employs the composition fallacy, which commits the logical error of assuming that what applies to the part necessarily applies to the whole. In a 2009 blog post on New Economic Perspectives, Dr. L. Randall Wray stresses that the composition fallacy is “One of the most important concepts to be taught in economics: [because] what might be true for individuals is probably not true for society as a whole.”[1] The above quotation from Minister Rob Anderson’s home page provides an example of the composition fallacy, because it assumes that the Alberta government should operate according to the same economic and fiscal principles as individual Albertans.
Families and individuals are not the same as the governments representing them. For example, let’s focus on Minister Anderson’s use of the term luxury. Is a government luxury the same as a household luxury? And what constitutes a government luxury, i.e. something that it can forego? During the Klein cuts of the 1990s, nurses, teachers, and roads were luxuries that the government cut to balance the budget. (Do Edmontonians want another hospital closure? Do we want larger classes? Are we content with cutting funding to supportive living facilities for older Albertans?) These “luxuries” are very different from household luxuries like televisions, new cars, or iPads. Are the consequences of delaying spending on teachers and healthcare staff the same as withholding household income on entertainment devices or new cars? What constitutes a responsible spending decision for a family differs from that of a government.
The composition fallacy allows luxury to remain un-predicated in Minister Anderson’s statement, and thus facilitates the equivocation of household luxury with spending on government services. The analogy permits another equivocation: assuming that government deficit spending is akin to a household living beyond its means. A government engaging in deficit spending to pay nurses, healthcare aides, civil servants, and teachers to provide public services is not the same as a household borrowing money to buy new appliances. Hence, Minister Anderson’s household analogy is a non sequitur.
It seems that the Conservatives will implement today’s budget along a very similar line to that promoted by the Wild Rose Party. Premier Redford and her party seem to be betting high on the composition fallacy: a logical fallacy that has been consistently challenged by economists. Minister Horner won’t even buy a new pair of shoes for the budget: “I’m not buying new shoes because I’m going to do with what I have because that’s the prudent thing to do. That’s what you’ll see in the budget.”[2] Shoes = Nurses, Teachers, and Doctors? If only it were so simple, but this is the power of the fallacy of composition.
[1] Dr. L Randall Wray, “Teaching the Fallacy of Composition: The Federal Budget Deficit,” on New Economic Perspectives (http://neweconomicperspectives.org/2009/08/teaching-fallacy-of-composition-federal.html), August 10, 2009. Also access via: (http://www.cfeps.org/pubs/pn/pn0601.htm)
[2] Sarah O’Donnel, “Premier Redford hints spending cuts on the way in Thursday’s budget,” The Edmonton Journal, March 6, 2013: http://www.edmontonjournal.com/business/Premier+Redford+hints+spending+cuts+Thursday/8059766/story.html
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