10/5/11

• Broken Window: 3 problems with the notion of the "stimulating" effect
• I didn't choose the roof (broken item to be repaired) in the first place
• people forced to lose $ on commodities that they already had
• we all become poorer by the $ amount needed for repair
• We lose the value of the Resources used to repair roof
• Forget $, Resources are essential
• All of the workers and tools used to repair roof  are taken from being useful elsewhere
• the tools and supplies and workers could've been needed elsewhere
• However: "..what if the roofer was unemployed?"
• Raising taxes leads to jobs being lost
• Resources have to be spent to create jobs
• Jobs are a Cost
• Benefit- paid income
• Cons
• Work in place of recreational time
• Resources used to create job
• World War II and the Broken Window Fallacy
• Consumption levels on average fell steadily for years
• Ability to consume resources fell
• Didn't improve consumer living standards
• Cost is Subjective
• worth of what is given up is different for each person
• cost given up to make a decision is unseen
• Marginal Analysis
• should i do x or y; should i do more of x or less of x
• water-diamond paradox
• something high in value and use has a low price
• something that's useless but has a high exchange value has a high price
• firms that make the best decisions think about margins
• 200 seat plane, total cost $100,000, average cost $500
• should they charge you less than $500 for tickets
• absolutely; they've spent $100,000 for the ride whether they have 100 or 200 passengers
• Marginal cost- the change in your cost from taking the action