August 8, 2010

Something Instructive: "The Broken Window Fallacy "

This short video explains one of the most persistent economic fallacies of our day. It has the added advantage of exposing that professional charlatan Paul Krugman.

HT: Morgan who saw it first and notes: "The epitaph for the times in which we live, is that it’s become radical to acknowledge that destroying things is destructive."

Posted by Vanderleun at August 8, 2010 7:53 PM
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"It is impossible to speak in such a way that you cannot be misunderstood." -- Karl Popper N.B.: Comments are moderated and may not appear immediately. Comments that exceed the obscenity or stupidity limits will be either edited or expunged.

destroying things is destructive.

That isn't a radical thought, but it is an impossible thought for a radical. I tried to explain that to folks in the sixties but they had absolutely no concept of the amount of work and time tied up in the infrastructure of civilization. I suppose that is because few of them had ever made anything and so couldn't value what was around them. And indeed that same inability seems endemic in our current political class.

Posted by: chuck at August 8, 2010 9:03 PM

Infrastructure is good and should be paid for thru bond and gasoline tax etc. The welfare state has strained the system such that it might never recover w/o some extraordinary event.

Posted by: sTevo at August 9, 2010 4:06 AM

And so we wind up with "cash for clunkers," a program that claimed it would improve the economy by destroying cars.

Posted by: Donald Sensing at August 9, 2010 7:39 AM

And paramount to the liberal agenda is the destruction of the human soul.

Posted by: Blastineau at August 9, 2010 9:56 AM

Thus, in Krugmanland, the Holocaust was the mother of all economic stimuli.

Posted by: Blastineau at August 9, 2010 10:38 AM

Ahh, there is one act of destruction that produces an economic net plus for society, that is the destruction of Socialism in all it's manifestations.

Posted by: Vermont Woodchuck at August 9, 2010 10:55 AM

If windows are to be broken let them be the opaque windows of the ruling class, better to see the wizzards.

Posted by: james wilson at August 9, 2010 11:02 AM

They teach the broken window theory in ECON 101, and in lots of private schools. Small business people and mothers understand it instinctively. Serving in the military brings you hard up against it, and honest, street level volunteer work rubs it into your soul.

Public schools, liberal think tanks and the rapidly obsolescing media ignore the whole inconvenient mess. And of course personal experience, history and common sense must never be allowed to interfere with a good elitist fantasy! Thus we can expect more "cash for whatever" programs, more boarded over vice pit buildings and vacant, filth generating city lots; more cover-ups and excuses and "social justice" driven attempts at remediation; until we smoke out, vote out, convert or bury every last liberal.

Posted by: Raincityjazz at August 9, 2010 1:08 PM

In their quest for Third World equivalency and normalization, liberals have no interest in repairing broken windows since this represents discrimination. Anyone who expresses their displeasure in living with window breakers is a bigot who only complains instead of reaching out to such alienated individuals.

Posted by: Hannon at August 9, 2010 1:20 PM

If someone broke all the windows in Paul Krugman's house do you think he would finally understand the principle?

Posted by: Brett_McS at August 10, 2010 12:11 AM

The Broken Window Fallacy (BWF) does not apply to stimulus bills in the US economy now.

Currently, money is tied up in excess saving as finance is too scared to invest and industry is too scared to borrow.

The result is unemployment.

The stimulus bills take money, from borrowing or inflation, that is, by printing money, and pay workers to do stuff. The workers family gets paid and stuff gets made. The unemployed baker can't buy a suit, but he can buy a meal, and a shirt.

It matters greatly, of course, what gets built. If the workers are paid to dig holes and fill them up again, it is not as good a result.

And it also matters if the shirt is made in China or in South Carolina.

Applying the BWF to the current economy is called the "Crowding Out" theory -- that the taxpayers will buy less because the money is paid in taxes. That is not true when the money is manufactured in a Zero Interest Rate economy like we have now. It would be true in times of full employment (or nearly full employment) with normal interest rates.

Posted by: Freddy at August 11, 2010 3:59 PM
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