Spending Yourself Rich as Seen By an 18th Century Frenchman

Frederic Bastiat–Harder To Fool Than We

Some of our pundits have found a silver lining in Hurricane Sandy’s storm clouds by bringing up all the jobs she created; a lot of people will be employed fixing the damage, right? Might perk up the economy! If so, at least no puffing politician will be able to believably take credit for it, though credit-taking among the breed seems unbelievable often enough.

However, a French economist wrote around 170 years ago to show the fallacy of such claims. Frederic Bastiat famously (among economists) wrote about a broken window. People, he said, pointed to the new work for the glazier and his assistant, the new order on the glassmaker and the work for the deliveryman and extolled the money being added to the economy just as some pundits are doing for Sandy. M. Bastiat pointed to something ignored by the admirers of window-breaking: The money being spent here was money used to repair a loss. No gain was made by that spending, it just bought a return to the way things were before. If there had been no loss, the money would have been available to add something new, something that might have improved the situation rather than just keeping it the way it had been.  Money spent repairing Hurricane Sandy’s destruction will gain nothing but the status quo ante and is no longer available for progress. It represents economic loss to the owner of the window and a transfer from that loser to the repairmen.

So far though, few seem to have carried the ‘Fallacy of the Broken Window’ to its logical conclusion as a cogent illustration of the fallacy of Keynesian economic claims that supposedly justify U.S. economic policy. The government has spent astronomical amounts of money that it did not have to ‘stimulate’ the economy. Since it did not have the money it has spent, it must be taken from taxpayers–from the economy supposedly being stimulated. Plus interest, of course. That is an economic loss to the broken economy just as the economic loss was suffered by the owner of the broken window. Another transfer then, from the losers to the repairmen. No gain.

In fact, it is worse because not only is the cost of the interest to be added to the loss but government waste and the cost of its bureaucracy, too. But it is still Bastiat’s now classical ‘Broken Window Fallacy,’ just with a very large window, indeed.

Frederic Bastiat died in 1850; rather inconsiderate of him…we could certainly use him now!

About Jack Curtis

Suspicious of government, doubtful of economics, fond of figure skating (but the off-ice part, not so much)
This entry was posted in Debt, Domestic Policy, Economics, Fiscal/Financial Responsibility, Overspending and tagged , , , . Bookmark the permalink.

2 Responses to Spending Yourself Rich as Seen By an 18th Century Frenchman

  1. the unit says:

    Reading your articles everyday…at least skimming…just too exhausted til this election is over to really contemplate and formulate seasoned comment. May be awhile huh? But this Bastiant reasoning needs no deep thought. Read him long ago. Rioters burn their own places, why I have to pay to replace as in times past. No creation of wealth…just redistribution…been going on for long time.

    • jackcurtis says:

      In one guise or another, I suspect it has gone on since government first existed… A politician is a fellow who has figured out how to buy his wealth and power with your money, right?

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