The Adding-Up Problem

The ‘Adding-Up Problem,’ or the ‘Fallacy of Composition,’ has been with us for some time. In presenting the favorable economic results of countries following outward-oriented policies, or advocating the adoption of such policies in other countries, one often encounters the objection: ‘But what would happen if everyone did the same?’ The implicit, or explicit, contention is that there would not be enough markets, or that protectionist reactions would be triggered in the developed world, as a result of the onslaught of exports by the developing countries.