AP MacroeconomicsCore Economic Concepts
Fallacy of Composition
The fallacy of composition is the error of assuming that what is true for one individual or part must also be true for the whole group or economy.
Standing up at a concert lets you see better, but if everyone stands, no one sees better; the same logic trips up economic reasoning. It explains why microeconomic intuition can mislead at the macro level, as in the paradox of thrift (one saver benefits, all savers cutting spending shrink the economy). Recognizing it is central to distinguishing micro from macro analysis.