Broken Windows Fallacy
3 Problems with the “Its stimulations” nation
1. I didn’t choose the roof to begin with
2. We lose the value of the RESOURCES used to repair roof.
3. But…What if the roof was unemployed?” AUS?
a. I.E. Ignore the $$, resources matter and..
· Before: $1,000 (Roof)
· After: $0 (Roof)
· Destruction does not cause prosperity.
· Government giving jobs
o Raising taxes today
o Raising taxes tomorrow
o You will have job loses tomorrow.
· The insurance paid for the roof, so the money was just seating there and it just went to economy and created jobs.
· Isn’t that stimulating?
· Remember to ignore the money, resources matter.
· Jobs are not a benefit, jobs are a cost.
o Benefit: I get an income to pay for the goods and services that I want.
o It will be better if I get all of those benefits without working.
o What’s the direction of the money? If jobs were a benefit Ill have give money to Rochester to sand there.
· What about WWII?
o Massive unemployment before WWII. (1 out of 8 people had work)
o How can all those millions of jobs creating bombs, tanks and more not be stimulating?
§ You can’t eat a bomb.
§ Low average consumption level.
§ How did the ability of consume all those normal things changed during WWII.
Cost is subjective
· Paying attention to class for the last 10 minutes has the cost of not thinking of my nap.
· Paying attention to class makes you not know what will if feel to think about nap so you do not know what you are giving up.
Marginal Analysis
· Water – diamond paradox
o Something really high in use has a very low value.
· Reconciliation:
o Rochester – New York Flight
o 200 seat plan with a total cost of $100,000.
o What is the average cost: $500
o Why will airlines let you in the plane for a $100 ticket?
o What is the cost of getting you in the plane?
o Conditional to the situation: What is the cost of the next person?
o Your Marginal Cost is the change in your cost from taking your action.
o Marginal Benefit is the benefit from taking action.
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