Economics in One Lesson

These notes are old and were written while reading — they don’t necessarily reflect my current views.

Broken window fallacy: This is a central one; the story goes that a boy throwing a rock through a window can not be of advantage to the economy. Sure, the shopkeeper will buy a new window, but the money he spend on the window will not be spend on other stuff. Instead of buying e.g. a suit, he now buys a window, therefore he would have had a window and a suit, but now only has a window. The window maker is better off, but only to the degree that the tailor is worse off. Neglecting the second order consequences will be a main theme of this book.

Nominal increase fallacy: Describes the misconception that printing money might lead to larger well-fare, which is obviously false due to inflation.

Free government spending fallacy. Whenever government spend something they have to pay it in the end. In the long-run we are not all dead. Someone has to pay (with interest)! No free lunch.

Could I do a reversed Haavelmo, which aims to destroy value through government? Probably.

Machines cause unemployment fallacy. Can again be shown mathematically, as there is labour needed for the machine. If this is less labour than the worker would have needed who is replaced by the machine, this makes production by the machine cheaper. Therefore, more products will be sold (higher well-fare) and they will be cheaper, therefore people have more money left which will also lead to higher well-fare.

Tarifs protect us fallacy, which us obviously false due to Ricardos calculations and again the secondary consequences in all other markets. There is the same argument against housing policy & minimum wages.

Can I go through all his examples with savings? → He actually does it himself in the inflation chapter.