the homes of the Hollywood stars, and Swedish-massage therapy would be the most popular form of medical treatment on earth. 5. Break It and You Bought It. Being fooled by hidden costs is the source of a lot of economic confusion. War is often spoken of as an economic stimulant. World War II “pulled America out of the Depression.” Germany and Japan experienced “economic miracles” after the war. Somebody is not counting the cost of getting killed and wounded. Besides, if destruction were the key to greater economic productivity, every investor on Wall Street would be learning Albanian. 6. Good Is Not as Good as Better. Almost as bad as costs that go unnoticed are benefits that get too much attention. It’s great if everybody has a job. Computers are taking jobs away. We could guarantee full employment if we removed computers—and electricity, too— from the telephone companies and hired people to run all over town and fly around the world, telling our friends and business associates what we want to say. When James Watt invented that steam engine, thousands of ten-year-old boys who had been hauling coal carts were put out of work. However, this left them free to do other things, such as live to be eleven. 7. The Past Is Past. Another thing that gets too much attention is money that’s already been spent. In economics this is called “sunk costs.” It doesn’t matter that you blew everything you made selling Apple at $1,000 a share on a scheme to genetically engineer squid. What matters is whether you can make any money off those squid now or convince people that the squid will make money in the future, so that those people will buy the fool company. This is called “marginal thinking,” and on Wall Street it means almost the exact opposite of what we usually mean when we call someone a marginal thinker. 8. Build It and They Will Come. Ralph Waldo Emerson was referring to better mousetraps, and the idea that the world would beat a path to your door for one tells us something about home hygiene in the nineteenth century. The underlying notion is stated formally in economics as Say’s Law (after French economist Jean Baptiste Say, 1767–
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