Sunday, May 04, 2008

HilBama's Broken Window Fallacy

James Pethokoukis of Capital Commerce points out a serious flaw in all those new "green collar" jobs Barrack Obama and Hilary Clinton hope to create in their plans to battle climate change. He writes,
As Clinton said in one presidential debate, "This issue of energy and global warming has the promise of creating millions of new jobs in America. It can be a win-win, if we do it right."

Heck, if climate change was a sham, it almost seems that it would be worthwhile to fabricate it, given all the apparent economic benefits. Then again, maybe not. Here is what William Pizer, an economist at Resources for the Future and a lead author on the most recent report from the U.N.'s Intergovernmental Panel on Climate Change, said at a symposium earlier this week here in Washington: "As an economist, I am skeptical that [dealing with climate change] is going to make money. You'll have new industries, but they'll be doing what old industries did but a higher net cost.... You'll be depleting other industries." [link]

So here's an idea for Obama and Clinton, next time try throwing stones at random windows, that way the people who fix windows will make a profit, and so many window-fixing jobs will be created and that would help the economy.

None of the democrats apparently have never heard of the broken window fallacy. In one of his most famous works, Fedric Bastiat, the 19th century French economist, wrote about the broken window fallacy about people who talk about the "economic benefits of war" adhere to. In an essay tittled What is seen and the unseen, Bastiat argued that while breaking windows will certainly benefit the window-fixers(glaziers), at the expense of other actors. He wrote,

Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—"It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"

Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.

Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.

But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."

It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented. [link]

Broken window fallacy, and Bastiat's essay could help in explaining the futility of how the Sri Lankan government is supposedly "creating jobs" for thousands of "unemployed graduates" by offering them jobs in an already over-bloated government.

Incidentally, the annual Bastiat prize for journalism is open for entries. Tragically, I can't name a single print or electronic media journalist from Sri Lanka, whom I can recommend for the prize.

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