Analyzing Froeb's 'One Lesson Of Business'
5. In Chapter 2, Froeb explains that the "One Lesson of Business" is that, "Wealth is created when assets move from lower to higher-valued uses." (p.12) Froeb goes on to spend most of the chapter talking about how taxation destroys wealth and that government subsidies (and all government spending is a subsity) also destroys wealth. Apply Froeb's "one lesson of business” to a specific government tax-and-spend decision that you support or else use the "one lesson of business” to explain why you are an anarchist.
A1) If you are not an anarchist, then explain how the government creates wealth by taxing-and-spending to produce some program somewhere that you support. Why do you think that the tax dollars are worth less to taxpayers than the value of the government program you selected? This can't be a zero-sum game that happens to benefit you personally. The "One Lesson of Business" is about wealth creation. For example, I can't simply defend Medicare …show more content…
You currently pay $5,000 per year in rent to a landlord for an office that you are considering purchasing for $100,000. You can qualify for a loan of $80,000 at 5% and you would need to make a $20,000 down payment on the office. To raise money for the down payment you would have to liquidate a safe investment that earns a steady 6% return. You can only use the loan money for buying the office, but you can always invest your own savings and earn 6% return. Neglect all other concerns (assume zero closing costs, capital gains, inflation, and taxes), and determine whether it is better to rent or own. Explain your calculations. There are numerous ways to do calculations that will get you the answer but two common techniques are to 1) calculate the cost of capital to rent and compare with the cost to own or 2) calculate what you would have at the end of a period of renting vs. what you would have after paying a mortgage for the same period. You can attach a spreadsheet if that helps you show your
A1) If you are not an anarchist, then explain how the government creates wealth by taxing-and-spending to produce some program somewhere that you support. Why do you think that the tax dollars are worth less to taxpayers than the value of the government program you selected? This can't be a zero-sum game that happens to benefit you personally. The "One Lesson of Business" is about wealth creation. For example, I can't simply defend Medicare …show more content…
You currently pay $5,000 per year in rent to a landlord for an office that you are considering purchasing for $100,000. You can qualify for a loan of $80,000 at 5% and you would need to make a $20,000 down payment on the office. To raise money for the down payment you would have to liquidate a safe investment that earns a steady 6% return. You can only use the loan money for buying the office, but you can always invest your own savings and earn 6% return. Neglect all other concerns (assume zero closing costs, capital gains, inflation, and taxes), and determine whether it is better to rent or own. Explain your calculations. There are numerous ways to do calculations that will get you the answer but two common techniques are to 1) calculate the cost of capital to rent and compare with the cost to own or 2) calculate what you would have at the end of a period of renting vs. what you would have after paying a mortgage for the same period. You can attach a spreadsheet if that helps you show your