Please review an essay:pointers appreciated.
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07 Aug 2013, 03:31
The following appeared in The Homebuilder magazine, a local publication with a focus on construction and sale of real-estate properties:
“According to the most recent survey of our readers, nearly 70% of the respondents indicated that they are planning to build or purchase a new home over the next 2 years. These results indicate that the growth in the construction industry is likely to accelerate in the near future. Therefore, this industry continues to offer lucrative opportunities for investment.”
Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound
Please ignore/forgive any spelling errors, if any.
The argument by the author of this article says that a large proportion of survey respondents indicated their will / need to either buy a home or construct a home in the next few years. On the basis of this, the author draws an intermediate conclusion that the the construction industry is likely to grow faster in the near future, offering lucrative investment opportunities.
The argument as written jumps from one place to another. First, directly on the basis of the survey, he concludes that the industry is likely to grow faster. Though, the results of the survey strenghten the position of the author. This in no way provides a sure shot reason to conclude that the industry is likely to grow.
The question to ask to evaluate this intermediate conclusion is whether the respondents of the survey were a group of people representing a very small proportion of the entire population. If this were true, then it s unlikely that the results of this survey are representative of the entire population.
To substantiate my point consider this example. Suppose these survey respondents were taken from a run down area of the city and they represent about 10% of the general population, then this section of people constitutes only a very small part of the entire population. In this case, the growth of the industry is a very unlikely event.
In continuing our focus on whether this group is actually representative of the entire population, we can consider the case that this group involved the youth, a section of society that constitutes only 5% of the general population, and that numbers to about only a few hundred.
In this case as well, we see that even if this small section of society purchases property, the net effect will not be very significant.
The main conclusion that the author draws is that the construction sector continues to be a lucrative sector for investment.
Assuming that the people of the city actually do represent a significant proportion of the population and that the construction industry will actually accelerate over the next few years, we cannot directly conclude that investing in this industry will be lucrative.
For an investment to be lucrative, it should be attractive in the sense that it offers high returns on investment, which means that an amount that an investor invests now should give him appreciable returns in the future.
The author of the article here makes an assumption that the growth of the industry will make the prices of land/real estate/share price of that particular construction company go up.
Suppose the CEOs of the construction company do not let the share price go up by employing certain stock market strategies or by not declaring their assets or by using the money earned to some other effect, causing the price of the share or of any other entity of the construction industry to stay the same or actually fall, then the conclusion will be shattered.
To conclude, I believe that this argument, though not a totally weak argument by any means, does not take into account certain assumptions and certain cases before drawing a conclusion.
To strengthen this argument , I would add the assumption- the companies will not resort to financial tactics in order to keep its value in the market the same- into the premise. This strengthens the argument considerably and prevents it from attack on these grounds.