Categories
economics

Japan and the broken window fallacy

If I hear one more “At least this disaster will spur japan’s economy” quip I’m going to scream. If massive destruction is so good for economies, why wait for natural disasters? We should go around blowing up houses and destroying infrastructure on a regular basis in order to keep the economy going…

 

Bastiat spelled out why this is silly way back in the 18th century. If a window is broken, the owner has to replace it. While the window guy benefits, the owner is only where he was before, but is now less well off after having paid for the window. Spending money just to get back where you were before will never be the way to prosperity. It is part of the “not seen” aspect of economics that is too easily overlooked and usually is.

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