To illustrate dead-weight loss in my intro micro class I first take out a dollar bill and give it to a student and then explain that the sum of the wealth of the people in the classroom hasn’t changed. Next, I take a second dollar bill and rip it up and throw it in the garbage. My students always laugh nervously as if I’ve done something scandalous like pulling down my pants. Why?
Because it signals “I am so wealthy that I can afford to tear up money” and blatantly signaling wealth is crass. And it also signals “I am so callous that I would rather tear up money than give it to the poor”, which is also crass. And the argument that a one dollar bill really isn’t very much money isn’t enough to disrupt the signal.
To illustrate dead-weight loss in my intro micro class I first take out a dollar bill and give it to a student and then explain that the sum of the wealth of the people in the classroom hasn’t changed. Next, I take a second dollar bill and rip it up and throw it in the garbage. My students always laugh nervously as if I’ve done something scandalous like pulling down my pants. Why?
Because you are breaking the law?
Because it signals “I am so wealthy that I can afford to tear up money” and blatantly signaling wealth is crass. And it also signals “I am so callous that I would rather tear up money than give it to the poor”, which is also crass. And the argument that a one dollar bill really isn’t very much money isn’t enough to disrupt the signal.
Because money is heavily charged with symbolism in our society, much like that which lies beneath pants.
Of course, destroying the dollar bill also doesn’t reduce societal wealth.
No, and I briefly make this macro point,
Because destroying money is viscerally aversive and surprising?