WW II Didn't Save the Depression, Breaking Windows Won't Help Your Wallet

**3 Problems with the "It's Stimulus" **

1) I didn't choose the roof to begin with
2) We lose the values of resources used to repair the roof
   -i.e. ignore the $, resources matter
3) But...what if roofer unemployed? Ooh good argument, but just wait

1) Consider: Rizzo worse off b/c wants driveway more than a roof; doesn't preference matter?
ex: Food. Doesn't matter as long as you get enough calories; imagine storm wipes out dfo and only liverwurst left, that's fine right? NO!

• preferences do matter, society is poorer by amount of pleasure you would have gotten from the driveway or other food

2) When replace roof, society poorer by exactly the amount of that roof
 --> stuff used for roof could have been used to make a porch
WWII did NOT get us out of the Great Depression
 => Destruction does not equal prosperity
-Instead of a new driveway...get another roof

"Silver lining" = bullshit
ex: stranded in airport, how nice you can contemplate thoughts and write poems!
-NO! Awful! Don't need to force people into that

ex: Gov't stimulus program to create jobs...but it's easy to create a job
-Rizzo offers you $100 to get him coffee, you do it.
-Don't See: Funds have to come from somewhere --> tax revenue
-"borrow" = tax incr. tomorrow
    -People in future have less income
-stimulus: trade old jobs for new jobs

RECAP: raise taxes today, tomorrow, or policy = job losses somewhere else
BUT we can't say what was lost or what would have happened. It just doesn't exist.

Scenario: People hide $ under the bed or give to insurance. STORM AGAIN! insurance pays for roof!
-this is great! economy sucks, people are employed, doesn't that create stimulus?

==> remember, ignore $, resources matter

-when build roof, need wood, (it could have been in that porch) 

• the price of wood and everything needed to make that roof goes up

-well, what about people working?

• Increase the cost of the roofer makes price of all roofers more expensive. suddenly we can't afford that porch!

-It puts someone in construction

• One less person who could have gone into computers or sales or conservation

Banks hoarding allll the $, just sitting on it

-bank risk vs employ

-$ on balance sheet, if $ taken out, what do the banks do?

• Recapitalize, try to get mo' money
• call in loans, stop giving loans

NOT COSTLESS!!!!!!

**Jobs are not a benefit, they are a cost**

-Yes, jobs pay for out food, but why do we work?

--> to get goods and services; if jobs were a benefit, Rizzo would pay us to teach

-massive unemployment in U.S. HUGE and after WWII everyone had a job making guns, bomb, ships

Problem: you can't eat a bomb. Consumption levels low (think 1929 low) until 1946

-consider rationing tickets, shipping food overseas (not accounting for massive deaths & destruction of cities)

-If wanted new streets, new buildings, consider pt. #1 of broken window

-imagine, if built planes and bombs without killing people. 

-take every factory worker, don't tell them what they doing 

  -TN uranium processing, women cleaned toxic stuff to kill people..and didn't know it .

-why use time & resources to give pay check..why not just give paycheck?

==>stimulus, why not just give $ (incentive not to work or waste resources)

-GDP goes up every time a bomb is made, doesn't go down when the bomb blows up

-not negative GDP when people are hungry & women have cancer from uranium

4) Cost is subjective

( read buchanan's cost and choice)

-value cost of paying attention in class vs. sleeping

- costs that matter in econ. never seen

5) Marginal Analysis

-way we make decisions: do x or y

-> reference with frame to x, more of x less of y

Water - Diamond Paradox (1871)

-Water vital, very high in value, in use but so CHEAP! very low exchange value

-Diamond..is a nice rock. Can't eat, build, just..pretty. BUT high exchange value!!!

-firms that make best decisions think of margins

ex: 200 seat plane, cost to fly is $100,000, avg cost per seat is $500

--> should airline sell ticket for less? why charge $100?

   => flight booked, 180 passengars, many people on standbym let people on plane for less

-firm knows, once committed to fly plane, already planning on spending $100,000

-consider, what is the cost to put me on the plane

-given people, given plane cost, next person on the plane will just add $ (look at margin, make it better)