: Is it bad for the narrative to lie? What I want to know is if it is bad for the narrative to lie to the reader. I get that using it in first person can be a good use for misdirection

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Here's an example based on AmaiKotori's answer. I edited and tweaked it down a bit to prevent spoilers since it's the very opening, but it will be recognizable to anyone who's read the novel in question. The novel and author name is down below.

Special Agent Alpha, stood in the doorway of a cheap, rented
room in a lower middle-class section of town near the Docks. The door
was open, and a man lay on the floor with a large, heavy-handled knife
in his chest.

Along the right-hand wall was a low bed. It was
made up, but the wrinkles in the cheap blue bedspread indicated that
someone had been sitting on it—most likely, the dead man.

Alpha looked
back down at the body. Then, cautiously, he closed the door behind
him, stepped over to the supine figure, and took a good look. He
lifted up one hand and felt for the pulse. There was none. GB was dead.

He took a step back from the corpse and looked at it thoughtfully. In
Alpha's pocket was currency, money which had been
drawn to pay GB for his services to the Agency. GB, he thought to himself,
would no longer be any drain upon the special fund.

He stepped over
the body and looked at the papers on the wooden table at the far
corner of the room. Nothing there of importance. Nothing that would
connect the man with the Agency. Nonetheless, he gathered them all together
and slipped them into his coat pocket. There was always the chance
that they might contain information in the form of coded writing or
secret inks.

The small closet in the right-hand corner of the room,
near the door, held only a change of clothing. Nothing in the pockets,
nothing in the lining. The two drawers in the closet revealed nothing
but underwear, stockings and other miscellaneous personal property.

Again he looked at the corpse. This search would have to be reported
immediately to the Chief, of course, but there were certain things
that it would be better for the local police not to find.

The room had
revealed nothing. Since GB had moved into the room only the day
before, it was highly unlikely that he could have constructed some
secret hiding place that would escape the penetrating search of Alpha. He
checked the room again and found nothing. A search of the body was
equally fruitless. GB had, then, already dispatched whatever
information he'd had.

Alpha looked around the room once more to make absolutely
certain that he had missed nothing and left.

What the reader is apparently reading is the story of a spy, sent to meet a contact (and pay them), finding the contact dead, and then sanitizing the room to make sure there was nothing to reveal that the victim was an informer.

What you're actually reading, and don't realize out until the end of the story when the protagonist reveals the plot the murder was a part of, is that this scene starts seconds after Alpha had just stabbed GB with said knife. He was checking to make sure he was dead, make sure there was no other witnesses, and not only making sure there was nothing to connect the victim to the Agency, he was making sure there was no evidence for the local cops to find connecting GB to him.

At no point is the author lying about what's going on or what's in the viewpoint character's head. They're just not giving you the entire context of what's going on. The details they've added about the search, and why the search and removal of possible evidence is occurring, is entirely understandable to the reader and justified and plausible from an in-story standpoint as something that character would do. They're just not saying it isn't the only, or even primary, reason the character is doing it.

SPOILER:

The novel is the Lord Darcy novel Too Many Magicians by Randall Garret.

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As Alexander stated in comments, the classic Kurasawa film Roshomon's plot centers around a disturbing court case where three separate people confess to the same crime and each one's confession is impossible to reconcile with each other and all three are not trust worthy. The trial portions of the film are shot so that the audience is in the position of a judge and the actors answer the questions as if they were asked by a participating audience (it's possible to even script questions to ask to recieve the actor's next response... and it's shot like Dora the Explorer where the actors pause to listen to the question and respond... a very very dark Dora the Explorer).

As stated, the disturbing nature of the case is that unlike a typical mystery, it's not to honest people and a liar claiming innocence, but 2 dishonest people and a honest person claiming guilt in the crime. And all three are given very plausible reasons to not be trusted (the highway robber is clearly trying to up his reputation as a dangerous criminal and his story casts him as a heroic rogue, the Samurai's wife is clearly playing to the period's sterotypes of women and was often depicted manipulating the robber and the samurai's emotions and maybe trying this in courtroom testimony, and the medium is channeling the spirit of the Samurai for his own story and can't be trusted before you even get to the Samurai's story where his time line of events is conflicts with the other two. Even the murder weapon is in dispute, with the thief using his sword, while the wife used the missing daggar and later tossed it into the ocean and the Samurai/Medium claiming he used it to kill himself, but it was removed after he had died and the spirit claims he felt it being removed, but did not know who removed as he was too far gone.

And then it turns out that even the facts of the case are in dispute as a witness that established the accepted portions of the timeline had been lying about what he saw because he committed a separate crime to the Samurai's murder. Kurosawa himself refused to confirm which of the four stories was true to fact and leaves it up to the audience to figure out for themselves. The whole film discusses the rational for why people lie, and deliberitly points out that lying to implicate one's self as the only guilty party in a murder makes no logical sense.

In literature in general, the plot device of a Red Herring is an element of the plot that is set up to shift suspicions from the real perpetrator of the mystery of the plot by showing the Red Herring acting in a mannor that superficially appears suspicious and is a well known plot device in mystery novels.

On Star Trek: Deep Space Nine, one episode deals with why the exiled Cardassian Garrak was exiled from Cardassia. During the episode, Garrak gives three stories about his war buddy Elim where Garrak's actions ended his career (something along the lines of Garrak took sympathy on some war orphans and tried to stop Elim from killing them and was exiled for disobeying an order OR Garrak commited the war crime (though the circumstances were different) and Elim outted him, then Garrak was homesick and neglected his duties, and the "war orphans" were really terrorist he could have stopped from an attack that killed Elim). At the end, the person who heard the stories learns that not only were all three false, but Elim never existed (it's really Garrack's first name) and when the character calls Garrak out on the lie and demands to know which of the three stories was true, Garrak responds with "My dear doctor, they're all true... especially the lies." A later episode even plays with this where Garrak is asked about the circumstances surrounding his exile, which he says it was all for Tax Evasion, which no one buys for a second... nor does Garrak expect them too.

Of course, if we want to get really Meta in our answer than the answer must be that story writers are expected to lie as a matter of course. After all, what is fiction but a series of events that definitely did not happen? You're always lying to the reader... it's just a very consistent lie.

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You can mislead, but don't cheat.

Convincing your readers of something that isn't actually the case is a perfectly valid technique; it's only natural to want to keep some surprises in store, and finding out their foundational beliefs are wrong can be a powerful moment for a character.

However, it's very important that after the reveal, the reader can look back through what they've been told and think "ooh, now I get it," not "now there's a plot hole there, and a plot hole there...." You need to always keep in mind the true state of affairs, and ensure that while the misleading things you narrate are reasonable in the moment, they never outright contradict the truth. An objective third-person narrator is, as you say, generally expected to be honest—but that doesn't mean they can't resort to technical truths and missed perspectives.

Even with that in mind, be careful to avoid eliding details the perspective characters ought to be aware of. If there's a crucial detail present in a scene that might unravel the deception, there's no need to highlight it, but make sure you mention it! A little suspicion is healthy, and clever readers will enjoy catching the clues, while if it only ever comes up post-reveal, it'll feel more like a retcon.

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