Broken window fallacy: Destruction boosts economy
Three points to argue:
(1)I don't choose the roof to start with
Society is poorer by the amount you would have gotten from what you desire.
You don't want a roof right;instead, you long for a car. But the destruction forces you to buy a new roof rather than a good car. Your preference and pleasure is impaired.
(2)We lose the value of the responses used for repairing. Before the destruction, I had a roof and 1000 bucks of saving, but now I only have a new roof with nothing else left. All the effort to repair would have been used other ways.
(3)"What if the roofer is unemployed"
Yes the roofer has more work and more money, but he is somewhat forced to do the job.He could have spent some time staying with his family.
Three ways the government get money:
(1)Tax. Jobs are created by taxes. But that also means we have less money to spend.
(2)Borrow. In fact this is the tax tomorrow,which means that in the future we will have less money to spend.
(3)Print money. With too much money floating on the market, inflation may happen.
Why banks hoard money:
(1)get capital in case of future crisis.
(2)recapitalize
Creating jobs may actually in the long run paralyze bank business.
Jobs are a cost. We have to work, using our time and energy, and sacrifice our leisure time.
More people were employed to make guns, tanks. But why was the rise of employment not stimulating?
Consumption level of household decrease because all the resources are shifted to the frontier.
Basic principles of economics
(4)Cost is highly subjective
The cost that matter for economy is never seen and the cost used to make decisions are never imposed on you.
(5)Marginal Analysis. Water and diamond paradox.
Marginal cost of water is low because it's plenty, while the marginal cost of a diamond is big due to its scarcity. But the total cost of water and diamond is just the opposite.
We make our decision according to different situations.
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