This fallacy comes from when you inappropriately ignore how the actions of an individual can affect a group when the effect is subtle.
Imagine you have a class of students who are all of equal ability. Half of those students will be above average1. Given that you can take any one of these below average students and give them extra help or motivation and they can become above average, the fallacy is that if you give each of the children who are below average extra help, you will end up with the mathematically impossible situation of having all the children above average2.
This has an application in economics where people have the belief that the general public can increase their supply of spending money by simply saving more than they spend. That belief is based on ignoring the inevitable effects that saving has on the money available to earn. As such, people can no more create prosperity in the economy through saving than students can all become above average. It is easier conceptualized if you consider small isolated groups, but there is no limit to the size of an economy where the effect holds true.
1
Arithmetic median given a perfect test of their knowledge of ability.
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2
This is where the name comes from. Garrison Keillor often tells tales from his hometown of Lake Wobegon where "all the women are strong, all the men are good-looking, and all the children are above average."
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