Krugman2e_Ch09 - chapter 9 > Making Decisions V IEW W O RL...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
W O R L D V I E Making Decisions 225 >> 9 A TALE OF TWO INVASIONS chapter: N JUNE 6, 1944, ALLIED SOLDIERS STORMED THE beaches of Normandy, beginning the liberation of France from German rule. Long before the assault, however, Allied generals had to make a crucial decision: where would the soldiers land? They had to make what we call an “either–or”decision. Either the invasion force could cross the English Channel at its narrowest point, Calais—which was what the Germans expected— or it could try to surprisethe Germans by landing farther west, in Normandy. Since men and landing craft were in limited supply, the Alliescouldnot do both. In fact, they chose to rely on surprise. The German defenses in Normandy were too weak to stop the landings, and the Allies went on to liber- ate France and win the war. Thirty years earlier, at the beginning of World War I, German generals had to make a different kind of decision. They, too, planned to invade France, in this case by land, and had decided to mount that inva- sion through Belgium. The decision they had to make was not an “either–or” but a “how much” decision: how much of their army should be allocatedto the invasionforce, and how much should be used to defend Germany’s border with France? The original plan, devised by General Alfred von Schlieffen, allocated most of the German army to the invasion force; on his deathbed, Schlieffen is supposed to have pleaded, “Keep the right wing [the invasion force] strong!” But his successor, General Helmuth von Moltke, weakened the plan: he reallocated to the defense some of the divisions that were supposed to race through Belgium. The weakened invasion force wasn’t strong enough: the defending French army stopped it 30 miles from Paris. Most military historians believe that by allocating too few men to the attack, von Moltke cost Germany the war. So Allied generals made the right decision in 1944; German generals made the wrong decision in 1914. The important point for this chapter is that in both cases the generals had to apply the same logic that applies to economic decisions, like consumption decisions by households and production decisions by businesses. In this chapter we will survey the principles involved in making eco- nomic decisions. These principles will help us understand how any indi- vidual—whether a con- sumer or a producer— makes an economic deci- sion. We begin by taking a deeper look at the significance of opportunity cost for economic decisions and the role it plays in “either–or” decisions. Next we turn to the problem of making “how much” decisions and the usefulness of marginal analysis. We then examine what kind of costs should be ignored in making a decision—costs that econo- mists call sunk costs. We end by considering the concept of present value and its importance for making decisions when costs and benefits arrive at different times.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 08/31/2009 for the course ECON 701 taught by Professor Charlie during the Spring '09 term at École Normale Supérieure.

Page1 / 24

Krugman2e_Ch09 - chapter 9 > Making Decisions V IEW W O RL...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online