Chapter I : The Lesson Of Economics

2035 Words Apr 1st, 2016 9 Pages
Chapter I: The Lesson – Economics involves looking at both the short-term and long-term effects of any policy or act and tracing the consequences of that policy for all groups, not just one. This is also the lesson of economics. Harm can come to the world if one looks only at the immediate consequences of an act or proposal, as well as looks at the consequences for only one group and neglect other groups.
Chapter II: Broken Window – Let us begin with the simplest illustration possible: let us, emulating Bastiat, choose a broken pane of glass. A young hoodlum heaves a brick through the window of a baker’s shop. A crowd gathers and begins to reflect philosophically about the situation. The misfortune has its bright side. It will make business for some glazier. The glazier will have $50 more to spend with other merchants, and these in turn will have $50 more to spend with still other merchants, and so ad infinitum. The smashed widow will go on providing money and employment in ever-widening circles.
Now, looking at the situation from another angle, the crowd is at least right in its first conclusion. But the shopkeeper will be out $50 that he was planning to spend for a new suit. The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot…

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