New York, NY (CLN) – Keynesian economists like to proliferate the economics of the broken window. This is the concept that disasters, such as a hurricane or even a space alien invasion (see here) can generate economic growth. Even since the days when French economist Frederic Bastiat refuted this idea in the 19th century, academics like Paul Krugman still espouse this failed notion.
Bastiat wrote in his legendary “That Which is Seen, and That Which is Not Seen” the tale of the broken window. Some person had thrown a rock at a shopkeeper’s window and had broken it. The owner was dismayed at the news and was extremely disappointed. The townspeople were also shocked by the news, but they claimed that at least the window repairman would be given business.
What is seen is that the window repairman will be given work now, but what is not seen is what the shop owner would have done with the money that he now has to fork over to fix his window. Instead of spending $200 for a new window, he could have spent that sum on a new suit, a visit to a nearby restaurant, a charity or could have even invested that into his or her local financial institution, which would have then been allocated to a startup as part of a loan.
The Broken Window Fallacy has been pontificated by politicians and Keynesians for a very long time. It was last year when Hurricane Sandy hit, but what did economists say? They argued that the states that were affected by the storm, which caused $68 billion in damages and the lives of nearly 300 people, would experience an economic boom because of construction, investment and other elements.
For years, it has been taught in classrooms that World War II, an event that led to the deaths of millions of people and hundreds of billions of dollars in damages, ended the Great Depression – never mind taking into account the massive budget cuts that transpired shortly after the war. Indeed, the Second World War only benefitted the military-industrial complex (weapons manufacturers, airplane developers and other defense contractors), while others suffered.
During the 1940s, the general public in the United States had to do without because an astronomical amount of food and materials were sent overseas for the war effort. Overseas, meanwhile, shops, pubs, theaters and others were experiencing unimaginable pain from constant bombardment. A small group of others, though, profited.
It’s about time that proponents of broken window economics understand the ramifications of their wishes and realize that destruction doesn’t help the poor, but only hurts them even more. Expanding massive budgets to dig ditches doesn’t create long-term prosperity, but just even more burden on the middle-class.
A space invasion, as Krugman cited in an interview with CNN, would cause trillions of dollars in damages and tens of millions of deaths. In the latest “Man of Steel” film, Superman and General Zod fight all over the city, but look at how much destruction and chaos it created. How does that spur long-term growth?
Isn’t it about time that these antiquated economists finally begin to promote the ideas of peace, prosperity and free markets rather than unwanted obliteration and annihilation? What’s sad is that these academics have influence in public policy and many legislators listen to the likes of these individuals. Yet, they are not held accountable for the failure of these policies. Remember the housing market crash, Krugman?
As Economic Collapse News noted, Krugman and his colleagues must get their economic models from “Twilight Zone” episodes.