Opportunity Costs: The Parable of the Broken Window

Some people argue that  natural disasters and other acts of destruction create wealth and employment as we repair the damage they’ve caused. Professor Dan Russell explains that this fallacy fails to take into “opportunity costs” into consideration. Whenever we use a resource for one purpose, like  fixing a window, we give up the opportunity to use that resource for another purpose. We only know if the use of a resource has created value if we compare it with the  the alternate uses we had to forego.  

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