We should compare the outcome of some event or policy to the alternative timeline in which that event never happened or that policy was never put in place. We should not compare before and after only. This alternative timeline, the “what would have been”. Is called counterfactual. Economics is all about counterfactuals because economics is all about choices. A choice is choosing one course of action over all others. The next-best course of action is the counterfactual (and the value of that next-best course of action is called the opportunity cost of the choice)…..Moreover, taxes and inflation do not bring about new resources – they only increase the amount of our resources that are consumed according to politicians’ and bureaucrats’ preferences.
Jonathan Newman, Ph.D., The Broken Window (2021)
Jonathan Newman is Assistant Professor of Economics and Finance at Bryan College and an Associated Scholar of the Mises Institute. He earned his PhD at Auburn University while a Research Fellow at the Mises Institute.
Dr. Newman on Twitter