PT 30, S2, Q 15, Recent Economic Downturn, Necessary Assump. Forum

[secretad]

I have not found an explanation for this question that answers my thoughts on this one.

The argument is definitely flawed, concluding that if standards are relaxed ---> banks will lend more money.

The premise for this is that before to the economic downturn, standards for bank loans were made stricter.

Another premise, not entirely relevant to conclusion of the argument, is that banks contributed to the decline by loaning less money.


The correct answer is (A): The downturn did not cause a significant decrease in the total amount of money on deposit with banks which is the source of funds for banks to lend.

If I negate this answer choice it should destroy the argument, as it is necessary to the argument.

The downturn did cause a significant decrease in the total amount of money on deposit with banks which is the source of funds for banks to lend.

How does that destroy the conclusion of: if standards are relaxed ---> banks will lend more money.

Just because there was a significant decrease in the total amount of money on deposit with banks, they can still LEND MORE money.

Example: Total amount on deposit for banks

March 2011...........Amount they lend
100 million.............1 dollar

July 2011...........Amount they lend
20 million............2 dollars

[WhoIsDonDraper]

So first off, answers B-E have nothing to do with the assumption or gap in reasoning. B only discusses the economic downturn. C is outside the scope since the arbitrariness or wisdom or any internal logic of the decision to tighten standards doesn't factor in to the conclusion about whether banks will loan money after standards are loosened. D and E are too extreme. He is only talking about this economic downturn in particular, so these don't have to be central to his argument.

Let's talk about A though. You are forgetting that the conclusion the author is drawing is causal. He is saying, that if standards are loosened banks WILL loan money. You are focusing too much on whether banks CAN lend money. Obviously they can loan money even if there has been a significant decrease in deposits. However, this causal relationship assumes that only one factor is stopping banks from loaning money, i.e. strict standards. But even if you loosen standards, you have to assume that there is no other factor that would make banks not want to loan money. And it is perfectly plausible that even though banks CAN loan money in spite of a significant loss in deposits, they WILL NOT do so. So therefore, since this is a causal assumption, it can't be the case that there is another reason that banks wouldn't want to loan money at all.

[secretad]

Can we really say that the conclusion is a causal one? It is a conditional conclusion, but it does not state that it if standards are relaxed then that causes the bank to lend more money.

If i go outside ---> then it will be hot

That is not causal.

How can we say that this is an implied causal conclusion as it stands with language that indicates a conditional relationship ?

[WhoIsDonDraper]

That's a bad counter example.
If standards are relaxed---> banks WILL loan more money.
That assumes that there is nothing else that would keep them from loaning money out. But if we take your number to be true: that banks lost like 80% of their deposit value, there is a really good chance that they wouldn't loan any money out. You have to assume that if only standards are relaxed, then they will for sure loan out more money.

But hey, argue against the answer you know is right, that will benefit you a lot on test day.

[secretad]

Actually doing what I am doing right now will benefit me more than simply not arguing a right answer because it is "right."

I want to know why it is right and the others are wrong. That is LSAT prep.

I know for a fact that conditional statements do not equal causal relationships. I simply want clarification how I know that, in this case, the conditional conclusion of "If standards are relaxed ---> banks will loan more money" is 100% a causal conclusion?

If A --> then B is the same thing as saying "if A happens, then B WILL happen.

That does not mean that A causes B.

I am not trying to be difficult, I want to know how it is known that this is causal.

[EarlCat]

I know for a fact that conditional statements do not equal causal relationships. I simply want clarification how I know that, in this case, the conditional conclusion of "If standards are relaxed ---> banks will loan more money" is 100% a causal conclusion?

If A --> then B is the same thing as saying "if A happens, then B WILL happen.

That does not mean that A causes B.

I am not trying to be difficult, I want to know how it is known that this is causal.

You can't just look at an Y --> X statement and tell if it's causal or only conditional. The whole discussion above is why I never concern myself about whether an "if-then" statement itself is causal. I know logic books and even some prominent LSAT books lots spend time discussing it. I don't care. It's a waste of time.

Here's what you should know about cause on the LSAT:

There are only two times cause matters on the LSAT. First is when the premise gives either a conditional statement or a correlation involving two events, and the author explicitly concludes one causes the other.

P: X --> Y or X & Y
C: X causes Y or Y is the only possible cause of X.

Second is when the premise shows a correlation between two events, and the author draws a conclusion conditioning one of those events on the other. That indicates a causal assumption (essentially one of the conclusions in the above pattern, but unstated).

P: X & Y
C: X --> Y or ~Y --> ~X

That's it. Memorize the above two patterns.

The argument in question is a causal argument because its unjustified "if-then" conclusion is based on a mere correlation: X happened when Y happened. The author concluded that if we remove Y, then X will cease happening. This is valid only if nothing other than Y causes X, which is the assumption addressed in answer choice A.

Notice, it was NOT the conditional conclusion itself ("~Y --> ~X" or "banks will lend more money if those standards are relaxed") that clues you in to the issue of cause! It's the conditional conclusion coupled with a mere correlation in the premise ("banks contributed to the decline by loaning less money [after] regulatory standards for loanmaking by banks were tightened").

Only this relationship between the premise and the conclusion tells you the author is presuming cause. If you can consistently spot these patterns, the answer will be obvious every time.

[secretad]

Thank you earlcat. So it is the case that if. Premise gives us a correlation between two variables and then gives us a conclusion that is conditional in nature....we can state that the author is making a causal assumption? I was not aware that this is necessarily true. I would like to know if i am understanding you correctly.

Premise: correlation of a and b

Conclusion: if a then b

This must be a causal assumption at work here?

[EarlCat]

Thank you earlcat. So it is the case that if. Premise gives us a correlation between two variables and then gives us a conclusion that is conditional in nature....we can state that the author is making a causal assumption? I was not aware that this is necessarily true. I would like to know if i am understanding you correctly.

Premise: correlation of a and b

Conclusion: if a then b

This must be a causal assumption at work here?

I'll preface this with the fact that I haven't done an empirical study to see if there's ever a case that contradicts me.

That being said, you probably aren't going to be told straight up "there is a correlation of A & B" unless the argument explicitly concludes cause. (Alternatively, if there is an indication the correlation is not 100%, then there might be a some/all flaw. See below.)

If the conclusion is a conditional, your premise is going to be that A and B have happened together, but not that they always happen together (which itself would be a conditional relationship between A & B, making a conditional conclusion about A & B circular, which almost never happens on the actual test).

So:
Cause/Correlation Flaw
P: A & B
C: If A then B

Circular Argument
P: A --> B and B --> A (i.e. A and B always happen together)
C: If A then B

Some/All Flaw
P: B usually follows A
C: If A then B

[secretad]

Thanks for your help EarlCat. I would appreciate help with this further in this context.

The correct answer is (A): The downturn did not cause a significant decrease in the total amount of money on deposit with banks which is the source of funds for banks to lend.

If I negate this answer choice it should destroy the argument, as it is necessary to the argument.

The downturn did cause a significant decrease in the total amount of money on deposit with banks which is the source of funds for banks to lend.

How does that destroy the conclusion of: if standards are relaxed ---> banks will lend more money.

Just because there was a significant decrease in the total amount of money on deposit with banks, they can still LEND MORE money.

Example: Total amount on deposit for banks

March 2011...........Amount they lend
100 million.............1 dollar

July 2011...........Amount they lend
20 million............2 dollars

If the conditional statement posited as the conclusion was not in fact a causal relationship, then choice (A) would not be a necessary assumption because of what is shown above.

What are your thoughts on this?

[totaltest.milan]

I think you’re wrong to focus on issues of causality in this question. In the initial post where you explained your approach to the question and what’s got you confused you alluded to negating the choice to destroy it because it’s necessary. And that’s precisely correct. Sorry if you’re familiar with this but I’ll just give you a quick run-through, take a look at this argument:

Secretad studies intensely for the LSAT. Therefore Secretad will do well on the October test.

What are the assumptions? Well, an obvious one is that ‘anyone who studies intensely for the LSAT will do well on it.’ And this is an example of an assumption that bridges a logical gap from the premises to the conclusion – in this case the premises talked about studying intensely for the test, and the conclusion talked about doing well on it. And there are other assumptions of this kind that will work for this argument – ‘anyone who studies intensely for a test will do well on it’, ‘if Secretad studies intensely they will do well’, etc. But there’s another kind of assumption that’s present in the argument and that the LSAT tests for. For example, what if I say that Secretad parties too hard the night before the test and misses the test? Or that the October LSAT is cancelled because of dust-storms? In both cases there’s no way that Secretad will do well on the October test and so you have to assume that Secretad is not too hung-over to miss the test and that dust storms will not force the October LSAT to be cancelled. What you just did with those two assumptions is to locate a potential problem that would make the conclusion not be true and you removed them. And this is the second major category of answers that you’ll find for these assumption questions. And that’s what choice A does.

The argument basically says that regulatory standards were tightened and subsequently banks loaned less money, and therefore if standards are relaxed then banks will loan more. Choice A asks ‘what if they don’t have money to lend anymore?’ What seems to be confusing you is what you said - that technically even if they have much less money they can still lend more than before. And that’s true, technically. But what you have to keep in mind is that ‘you should not make assumptions that are by commonsense standards implausible’, and saying that a bank that has 100 million in march will lend 1 dollar, and 20 million in july 2 dollars is an implausible assumption. The way that it actually works in the real world is that banks lend a fixed percentage of their reserves depending on market conditions, so the assumption that less funds equals less lending is a reasonable assumption. And that’s what I think is the issue here, you’re overanalyzing the argument. I’ve had plenty of students who did the same thing; a better understanding comes through more exposure to the assumption questions and seeing how the answer choices fall into the different categories.

To recap, assumption questions will ask you to pick the choice that either bridges a logical gap, removes a potential problem, or states something that has to be obviously true (I didn’t go into that here but an example for the sample argument above could be ‘Secretad will take the test’). Take a look at the following list of assumption questions that have the same kind of assumption as this one here and take a look at my website – I have tons of articles dealing with all aspects of the LSAT including one that explains the assumption questions.


LSAT 7, S2, Q14 (correct choice E)
LSAT 7, S4, Q6 (correct choice C)
LSAT 9, S2, Q21 (correct choice D)
LSAT 9, S4, Q10 (correct choice B)
LSAT 9, S4, Q25 (correct choice D)

[EarlCat]

Thanks for your help EarlCat. I would appreciate help with this further in this context.

The correct answer is (A): The downturn did not cause a significant decrease in the total amount of money on deposit with banks which is the source of funds for banks to lend.

If I negate this answer choice it should destroy the argument, as it is necessary to the argument.

The downturn did cause a significant decrease in the total amount of money on deposit with banks which is the source of funds for banks to lend.

How does that destroy the conclusion of: if standards are relaxed ---> banks will lend more money.

Just because there was a significant decrease in the total amount of money on deposit with banks, they can still LEND MORE money.

Example: Total amount on deposit for banks

March 2011...........Amount they lend
100 million.............1 dollar

July 2011...........Amount they lend
20 million............2 dollars

If the conditional statement posited as the conclusion was not in fact a causal relationship, then choice (A) would not be a necessary assumption because of what is shown above.

What are your thoughts on this?

I think this is a classic case of overthinking. Before you go to this length to discard an answer choice, you first need a good reason choose another answer. (Hint: Answers never require this depth of analysis to be discarded.) Second, I think you're not parsing the answer choice quite right. (A) indicates that the total amount of money on deposit with banks is the source of funds for the lending. Your hypothetical above has them using something less than the total amount as the source of the lending.

[secretad]

Yeah, at the end of the day, (A) is the only answer that is even close to a necessary assumption.

My thought process with (A) comes down to this EarlCat:

A) The downturn did not cause a significant decrease in the total amount of money on deposit with banks which is the source of funds for banks to lend.

Negated A) The downturn did cause a significant decrease in the total amount of money on deposit with banks which is the source of funds for banks to lend.

A negated (A) is to show that the argument cannot live or be valid without this.

I think it can.

The conclusion is: if standards are relaxed ---> banks will lend more money.

Even if the the downturn did cause a significant decrease in the TOTAL amount of money, the banks can still lend more money if standards are relaxed. The assumption A states does not seem to be necessary unless you make the conclusion of this argument a causal one, and as it stands, it is a conditional statement. However, you have said that a correlation that is concluded as a conditional has a causal assumption.

This problem may be overthinking, but I must get control of my thought process on this one. I almost always understand necessary assumptions, as they can be easy to see the argument destroyed by a negation test. This negation test of (A) does not destroy the conclusion.

[EarlCat]

This is why I cringe when I hear people advising other people to take logic classes to prepare for the LSAT. There's actually a lot of debate among logicians about whether there is even a such thing as a necessary assumption (LSAC has even published some of it). The argument is basically that, no matter what, you can always cobble a narrower assumption than the one claimed to have been necessary. So you're actually among some very bright company in questioning whether a "necessary" assumption is really necessary. Regardless, LSAC figures their necessary assumptions are close enough.

I still think that because the total amount of funds is the source of the lending, lending must be limited by the total amount (e.g. you can't lend more without more funds). Perhaps that's debatable.

Someone raised the idea that it's common-sense that banks lend all or almost all their money. I'm not sure that's necessarily the case or, if it were, whether you'd be expected to rely on that on the LSAT. As in life, I only use common sense as a last resort.

I think the most efficient way of dealing with a question like this is to recognize that causal flaw pattern and choose the answer that addresses it.

[secretad]

You see earlcat, that is my problem on this question. You say there is a causal flaw but all that happens in this argument is a correlation in the premises and a conditional statement as the conclusion. There is not a causal element present. You have said that such an arrangement of correlation to concluding a conditional is a causal assumption at work. I simply have never heard of this direct idea.

I have seen necessary assumption correct answers that i shrug my shoulders at, but i feel this is simply a bad one.

[EarlCat]

You have said that such an arrangement of correlation to concluding a conditional is a causal assumption at work. I simply have never heard of this direct idea.

Now you have.

But seriously, this is a pretty run-of-the-mill LSAT question that follows a pattern that the test writers have used and reused many times.

I think maybe you're too hung up on trying to tell whether the conditional itself is causal. Again, you will never recognize a conditional statement as causal in a vacuum. There simply isn't enough information.

Just think about the following statements:

A is sufficient for B
A only if B
B is necessary for A
Without B, there can be no A

Each of these (presumably) non-causal statements can be represented by

A --> B

Now consider these:

A always causes B.
B is the only possible cause of A
C (and only C) always causes both A and B

Each of these causal statements can also be (at least partially) represented by

A --> B

So you can't tell whether a conclusion of A --> B alone is causal (or based on the presumption of causation) without looking at the context I discussed earlier.

Bottom line: Just memorize those two patterns in my first post.

[secretad]

I want to throw the entire cause issue out for a moment. Tell me, EarlCat, if you agree with this.

If you negate choice (A) you get:

The downturn did cause a significant decrease in the total amount of money on deposit with banks which is the source of funds for banks to lend.

Does that destroy the conclusion of this argument?

The conclusion is: if standards are relaxed ---> banks will lend more money.

My thoughts: Even if the downturn caused a significant decrease in the total amount of money on deposit with banks, couldn't the banks still loan more money?

I think a necessary assumption is that the downturn did not cause a complete depletion of deposit bank money. However, a significant decrease of deposit money does not necessarily affect banks lending more money.

[secretad]

Bump for answer on the above post.

[EarlCat]

I think a necessary assumption is that the downturn did not cause a complete depletion of deposit bank money. However, a significant decrease of deposit money does not necessarily affect banks lending more money.

I've already addressed this and I don't know how to say it any differently. The answer choice tells you that the total amount is the source of funds for the bank to lend. It does NOT say that the amount loaned is based on something less than the total amount of deposits or that the amount loaned is subject to the bank's arbitrary discretion.

If that doesn't convince you, you can always fall back on the common sense notion that banks are in the business of lending money are not going to avoid lending it. It would be a breach of their fiduciary duty to their shareholders if they refused to lend money they otherwise could. Even if the banks keep significant cash reserves (yeah right), it's absurd to think their lending wouldn't at least be in proportion to total deposits.

[secretad]

THANK YOU EARLCAT!!!

I was assuming that other things were included in deposits other than as a source of loaning.

I am at peace!!!!