John Stossel is sometimes referred to as the rockstar of “free thinking people”, no doubt I enjoy his former ABC and current FOX News specials immensely. I recently found out he writes a column on the Real Clear Politics webiste.
A couple of weeks ago he wrote an article simply explaining the broken windows fallacy, here is part of it:
Even as smart a person as economist John Maynard Keynes seemed to forget about that when he wrote in his “General Theory” back in 1936, “Pyramid-building, earthquakes, even wars may serve to increase wealth.”
By that logic, government could create full employment tomorrow by outlawing machines. Think of all the work there’d be to do then!
Think about the two other methods to “increase wealth” that Keynes lumped in with pyramid-building: earthquakes and war. Now, sure, after a war or earthquake, there’s plenty of construction to be done. After the Haitian earthquake, Nancy Pelosi actually said, “I think that this can be an opportunity for a real boom economy in Haiti.” New York Times columnist Paul Krugman made a similar error. On CNN, he said if “space aliens were planning to attack and we needed a massive buildup to counter the space alien threat … this slump would be over in 18 months.” Before that, he said the 9/11 attacks would be good for the economy.
This is Keynesian cluelessness at its worst.
Isn’t it obvious that without a catastrophe those same workers and resources could have done productive work — with the overall standard of living higher as a result? There is something wrong with mainstream politics and economics when some of its most respected practitioners overlook this point.
The economic philosopher Frederic Bastiat called their mistake the “broken window fallacy.” If I break your window, it’s easy to see that I gave work to a glass-maker. But what we don’t see is this: You would have improved your circumstances with the money you paid the glass-maker. He merely restored your previous condition. That money could have created different jobs, perhaps more productive ones. They’re unseen.
People favor government projects because they notice the seen, not the unseen.
Creating jobs is not difficult for government. What is difficult is creating jobs that produce wealth.
The private sector does that.
pinkofreezone 