· Broken Window Fallacy: Application
o Government stimulus
§ Funds must come from somewhere (borrowing, funding cuts, tax revenues, etc.)
§ Every job you create with limited funds in one field means you can’t create another job in a different field
§ Government ignores this, though net job creation is possibly negative
o World War II:
§ Though unemployment dropped from 1937 (33%) to 1942-43 (less than 5%) World War II was not stimulating
§ Household consumption and the distribution of goods domestically was shockingly low because goods being produced were going towards the military
§ Improvements to technology were almost negligible because war isn’t required to improve technology
§ It’s more efficient to just give the people the money than to pay them as they did in WWII
· Cost is subjective
o The value you pay on your best option is the cost you are paying to be doing what you are currently doing
o Cost of doing an action is all relative to the people who want to do it
· Marginal Analysis
o Involves identifying the benefits and costs of different sets of goods or services
o Supports decision-making based on marginal or incremental changes
o The marginal cost is the change in your cost by taking the action
o The marginal benefit is the change in your benefit by taking the action
o Examples include the water-diamond paradox
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