Chapter I The Lesson Of Economics - 2035 Words

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†¦show more content†¦The crowd sees only what it immediately visible to the eye. Chapter III: The Blessings of Destruction – War will change the post-war direction of effort, the balance of industries; and the structure of industry. The consequences of these changes include another distribution of demand when accumulated needs for houses and other durable goods have been made up. Then temporarily favored industries will shrink to allow other industries filling other needs to grow. Demand will be diverted from one commodity to another and it will shrink in total amount. This is unavoidable when we remember that supply creates demand because at bottom it is demand. The supply of the thing people make is all that they have to offer in exchange for the things they want. Inflation may look like the creation of more demand; but in terms of the actual production and exchange of real things it is not. Yet a fall in post-war demand may be concealed from many people by the illusions caused by higher money wages that are more than offset by higher prices. Chapter IV: Public Works Mean Taxes – A certain amount of public spending is necessary to perform essential government functions. Such public works are of no concern if they are necessary for their own sake. However, the public works that are considered as a means of â€Å"providing employment† or of adding wealth to a community, are of much concern. The two arguments to these kind of public works are