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MaternjiDisastrous Economic Fallacies: Bastiat vs Krugman
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Do natural disasters, earthquakes, or wars stimulate an economy? See and hear the famous Frederic Bastiat's broken window fallacy explained by the Atlas Research Foundation Vice President Dr. Tom G. Palmer.
(see video at the bottom of the article)
Transcript:
Disastrous economic fallacies
"The terror attack – like the original day of infamy, which brought an end to the Great Depression – could even do some economic good." - Paul Krugman (New Your Times, 9/14/2001)
"... economically the net result of the terrorists' actions is likely to be beneficial to the United States." - Timothy Noah (Slate, 9/12/2001)
"Despite the devastation, experts said today that in some ways the earthquake could give a boost to an economy struggling to recover from a long recession." - Nicholas Kristof (New York Times, 1/18/1995)
Dr. Tom G. Palmer, Vice President of Atlas Research Foundation
Have you ever heard anyone say that a natural disaster, or a war or an act of terrorism is good for the economy? Have you ever heard that World War II got us out of the Great Depression? Well, if you've heard those sorts of things, you really need to listen to Frederic Bastiat. He explained in his famous story "The Broken Window" how destruction cannot in fact create wealth.
The story goes as follows: imagine you are in a village, when a small child breaks the window at a local bakery. The normal response of a parent would be to school the child for recklessness. But under the economic theory that we hear so many people advance today, the child would be lauded as a hero. Why? He stimulated the village economy. He created work for the glass maker.
The Bastiat shows that we're not paying attention when we think that way. To what is not seen. Specifically, that had the window not been broken, the baker would have used the money to buy a suit instead, and there would have been a job for the tailor. The village in the aggregate would have been richer, there would have been a window, and a new suit. Instead, there's just a window and no suit. That act of breaking the window made the village poorer, not richer.
So any time you hear someone say how lucky we are because there was an earthquake, or an act of terrorism, or the World War II ended the Great Depression, think about Bastiat's story of the broken window.
Property, not plunder – Bastiat's legacy.
