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Paul Krugman and the Broken Window Fallacy [VIDEO]
Yesterday, Google+ and Twitter were abuzz with a quote which was attributed to New York Times columnist and economist Paul Krugman:
People on twitter might be joking, but in all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage.
It has since been shown to be a fraudulent and this guy has admitted writing the false quote. But the reason everyone fell for it is because Krugman has repeatedly made other ridiculous Keynesian claims that demonstrate a demented view of reality.
For instance, only three days after the 9/11 attacks, he said:
“Nonetheless, we must ask about the economic aftershocks from Tuesday’s horror.These aftershocks need not be major. Ghastly as it may seem to say this, the terror attack — like the original day of infamy, which brought an end to the Great Depression — could even do some economic good.”
Regarding World War II:
“It took an enormous public works program known as World War II to bring the economy out of the depression.”
And more recently, Krugman had this to say about the earthquake catastrophe in Japan:
“And yes, this does mean that the nuclear catastrophe could end up being expansionary, if not for Japan then at least for the world as a whole. If this sounds crazy, well, liquidity-trap economics is like that — remember, World War II ended the Great Depression.”
Sadly, there are many idiots who believe what Krugman has to say, despite the fact that his misinformed harangues are proven wrong every day by the Obama administration’s continued failures.
With that in mind, this video handily refutes the “Broken Window Fallacy” around which many of Krugman’s myopic economic opinions are based.
Excerpted from Chapter II of Economics in One Lesson by Henry Hazlitt:
A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Two hundred and fifty dollars? That will be quite a sun. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.
Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $250 that he was planning to spend for a new suit. Because he has had to replace the window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.
The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.*
Posted by FullMetalPatriot
12th gen. American, Constitutionalist, Harley-riding Texan, gun owner & NRA member, blogger, illustrator, Florida Gator alumnus. #TCOT
12th gen. American, Constitutionalist, Harley-riding Texan, gun owner & NRA member, blogger, illustrator, Florida Gator alumnus. #TCOT
The crazy thing about the Google+ quote was that I thought it easily could have been said by Krugman. Krugman represents the worst form of over-educated evil and socialistic foolishiess this nation has ever known.