The Fallacy of the Heap Returns

The (il)logic of Obamaeconomics has returned:

• Each $100 of weekly unemployment bonus has hardly any negative effect (some might say "no statistically significant effect") on employment or GDP.
• Food stamp benefits have hardly any negative effect on employment or GDP.
• Rental assistance has hardly any negative effect on employment or GDP.
• Obamacare subsidies have hardly any negative effect on employment or GDP.
• Minimum wage increases have hardly any negative effect on employment or GDP.
• A new negative income tax has hardly any negative effect on employment or GDP.

My writings rarely express disagreement with any of the bullets by themselves.  For the sake of argument, I am not disputing them here.

Where I disagree is the assertion that the combination of all of the bullets, which is Biden's pandemic relief proposal, would have hardly any negative effect on employment or GDP.  We could talk about the convexity of deadweight costs, and the fact that the new redistribution goes on top of a lot of redistribution in the baseline, but this point was well known even among the noneconomist ancients.  It is the fallacy of the heap.

Every Econ 101 teacher has to confront this fallacy.  Invariably every class has a student pushing back on the law of demand, "Raise the price of a car by a penny and that will not stop anyone from purchasing the car."  Teacher has to say, OK let the seller of the car raise the price $10,000, just one penny at a time.  Each penny increase has no effect on sales ... therefore $10K has no effect on sales.

Economists  beware of vague predicates!  Biden's smorgasbord of redistribution will noticeably reduce employment and GDP.