Broken Windows Around the World

The day after the East Coast earthquake, Bastiat's glazier is busy.

Here’s something New York Times columnist and Nobel Prize-winning economist Paul Krugman didn’t say about yesterday's East Coast earthquake:

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.

Turns out, someone else has been manning a fake Krugman Google+ account for more than a month. It was supposed to be parody, but no one noticed (though alert Freakonomics blog readers might have gotten an early hint) until this line got lots of pickup after the quake.

Krugman may not have been the perpetrator this time (go here for a roundup of other times he has flirted with similar logic), but the fallacy embedded in Frederic Bastiat’s parable of the broken window is alive and well on this post-earthquake day.

A quick refresher on the economic fable, for those who have been out of the classroom for awhile: 

A shopkeeper’s son breaks a pane of glass and a crowd gathers. Well-meaning pedestrians find a silver lining to the accident: “Everybody must live,” they say, “and what would become of the glaziers if panes of glass were never broken?" Bastiat cautions that if “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.'" The six francs the man must spend to repair the glass are now gone. Had the glass not been broken, the shopkeeper could have enjoyed an intact window, plus a new pair of shoes, or perhaps a book.

There have been a few reports of actual windows broken by the East Coast earthquake. But earthquakes (and clumsy sons) aren’t the only way windows get broken. Let’s take a look at a few other broken windows around the world today, and how they were greeted by the owners of those windows.

First up, a story about a wave of vandalism across the pond in the Welsh town of Abergele.

Muhim Uddin, manager of an Indian restaurant called The Spice Market, told a local paper:

It is difficult enough and this is an extra expense for us....But these repairs have to be done. It’s not good.

In the same town, Moira Byrne of Jade Leaf Cafe points to another unseen cost:

A lot of the time it’s not worth claiming on your insurance to repair the windows because your premium will go up.

There was a particularly stimulating window break at a New Zealand prison in the wee hours this morning:

Police were called to Mt Eden prison overnight after a reinforced window near the prison's control room was broken. A large police presence was reported around the prison to ensure nobody was trying to break in or out.

Think of all that overtime paid, in addition to the new window!

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  • Mister DNA||

  • Pauly Krugnuts||

    Forget about the Broken Window Fallacy. Killing people is what's good for the economy.

  • Pol Pot||

    I tried to tell y'all!

  • Warty||

    Slowly, broken windows returning to the sand
    The economic factors are no longer relevant

  • A Serious Man||

    You don't have to tell us that, just most Keyensians. Take for instance this one guy who was defending the faux-Krguman quote by saying that the destruction of property gets "idle" money flowing and can thus be beneficially in escaping a liquidity trap. Nevermind that there is no intelligent natural disaster that would only target and destroy the property of wealthy people, no, all forms of savings are bad.

  • Colonel_Angus||

    Wealth is not created by destroying assets. See: Cash for Clunkers.

  • Amakudari||

  • pmains||

    And yet, we were told over and over again that it was a rousing success.

  • Tman||

    It's absolutely baffling that people still defend the C4C program. You could not have designed a better government sponsored example of the Broken Window Fallacy were you Bastiat himself. It's like one giant economics lesson.

    Irwin Seltzer had a great piece about C4C a couple years ago here-

    http://washingtonexaminer.com/.....rs-failure

  • JD the elder||

    The one thing I will say about C4C is that if you posit a situation in which people can save $3 per year by getting a new whatsit (vs keeping the old whatsit), but a new whatsit would cost $10 up front, then some people without the $10 will not make the upgrade; by subsidizing the upgrade you've helped propel whatsit owners out of their equilibrium and into a state which everyone agrees is better.

    That said, to believe the real world is exactly like that is to ignore the fact that in the real world, people do borrow money for exactly this kind of reason, and it doesn't take a government program to do it, because people are not as stupid and lumpen as government economists tend to think they are.

  • Colonel_Angus||

    You are not taking in to account that the subsidy required the destruction of the old cars, which would have entered the used market. The reduced supply of used cars increased the price of existing used cars, forcing people to spend more money or buy shittier cars. Net equilibrium change: ~0.

  • Jim||

    Actually you can. Krugman is not the only moron who says that WWII took us out of the depression. Now THAT's a broken window.

    It is why he is now touting space aliens as a way to garner more stimulus.

  • Fist of Etiquette||

    Maybe the media shouldn't even be covering the broken window fallacy since Bastiat will never be president.

    (Boom! You just got Fisted. No, wait, that's no good. You just got FoE'd.)

  • Joe M||

    Zing!

  • Almanian||

    HAH!

    /Chris Matthews

  • fish||

    TINGLE!

    /Chris Matthews

  • Chris Matthews||

    It was a THRILL, dammit!

    Do I have to get Ed Schultz to torch this fuckin' place, or what?

  • ||

    I like this Carlos R. Graterol fellow. Funny, has balls, understands economics. All rare qualities.

    When I read the fake quote this morning, I thought it was real and it didn't surprise me in the least. Krugman has said much dumber things.

  • ||

    It's scary when you can't tell the real one from the parody.

  • Juice||

    Poe's Law.

  • fish||

    Tonys Law

  • Cole's||

    law.

  • Thinly sliced cabbage||

    With or without pineapple.

  • Judge Dredd||

    I AM THE LAAAAAAAAAAAAAAAAWWWWWWWWWWWWWWWWWWWWWWWWWWWW!!!!!!

  • ||

    word

  • pmains||

    Since nobody else mentioned it, we are still awaiting an official RonPaulogy, Ms. Mango-Ward.

  • sailor||

    for what? Stating an opinion? It is an opinion. I don't think he can win either. Doesn't make it true.

  • Libertarian||

    Well, there are right opinions and there are wrong opinions.

  • pmains||

    Exactly. I say we burn the witch.

  • Paul||

    If he doesn't win, did that make her opinion right? Or does Ron Paul lose because of an uttered opinion by a single obscure Reason writer?

    If the latter's the case, maybe Krugman's right about the nascent power of libertarians. We really do control the world, we just haven't realized it yet.

  • Mr Whipple||

    She hasn't cashed the check from the KOCHTOPUS yet.

  • pmains||

    I'm always confused as to which side the KOCHTOPUS is on. My liberal friends tell me that they support libertarian candidates. I assume that would include Ron Paul and Gary Johnson. Who do our tentacled overlords support for the GOP nod?

  • Mr. FIFY||

    They're just deflecting attention away from that prick Soros.

  • ||

    I'm curious more about her previous opinion of Sarah Palin. Do Palin's views still "mesh" with her views?

  • Albino Squaw||

    Privately owned windows are nature's property illegally held through force. They should be broken. As for your so-called "world economy," it is nothing but an illusion that will fall anyway.

  • Almanian Blanco Native||

    [Bas]tiat is a [Bas]tard, [Bas]ting blustery blather fit only for the agri[CULTURAL] losers.
    [Bas]ically, you Lumbertyrolians de[Bas]e all that is good about First [Peeps]. You will have your own [Bas]tille day!

    /derp huh what?

  • Moon-White Redskin||

    Agriculture derp derp derp End of Civilization herp a-derp derp.

  • WTF||

    +1

  • Ken E.||

    More neocon bashing of RP (active thread — you can go there now):

    Ron Paul’s Misunderstanding of Modern Warfare

  • pmains||

    I didn't count a single supportive comment. I read some comments in response to comments that were critical of the criticisms, but it seems that Nick Whateverhisnameis did not get the reception he hoped for.

  • Gojira (formerly Jim)||

    The best part is when one of the commenters suggested that the gov't covered up secret evidence of muslim involvement in the OKC bombing.

    Timothy McVeigh: dupe, or fall-guy?

  • Brian D||

    I didn't know Ron Paul even played video games.

  • ||

    Notably, Matt Yglesias has tried to argue that Bastiat's fallacy doesn't apply (or has been misapplied) by Krugman's critics. Some good further discussion of the issue here: http://consultingbyrpm.com/blo.....llacy.html

  • Almanian||

    We already knew Yglesias is, in fact, that stupid, but it's nice of him to re-confirm that fact every so often pretty much daily.

  • ||

    Yglesias has analyzed the situation quite correctly. Since you can't point out any actual errors or anything of the sort, it's best to just call him names!

  • ||

    Neither Yglesias (nor Daniel Kuehn) have analyzed the situation even remotely correctly, as they persist in using GDP growth as a measure of national prosperity even in circumstances where no intelligent person finds the kind of "growth" being measured desireable.

  • ||

    GDP double counts stimulus spending - once as G and once as C.

    That's where you get the supposed "multiplier effect", yet at the same time end up with 10% unemployment $2 trillion (or whatever it is now) later.

    It's an illusion created by the stupid way GDP is calculated.

  • ||

    It runs deeper than that.

    In the wake of a national catastrophe of course you're going to see GDP increase. But relative to the pre-catastrophe state of things it doesn't actually represent economic growth in the sense that normal people care about; we're just replacing lost wealth. Certainly, given the catastrophe, it's better to rebuild than not, but it's not a desireable state of affairs even though it may result in a temporary GDP increase. GDP, in that situation, isn't reflecting real economic growth.

    Keynesian devotees like Kuehn, and drooling imbeciles like Yglesias, argue, "We're not saying that catastrophes are a good thing, but the necessary rebuilding that follows will goose GDP and employment statistics." To which sensible people should respond, "So fucking what? GDP and employment statistics are useful metrics only insofar as they're measuring real economic growth and productive employment; here, they're not."

  • Amakudari||

    This isn't even worth responding to. In that thread you're posting in, you have people defending breaking the baker's window. The baker wastes his time going to the glazier and winds up poorer in the process, and the glazier is compensated to return things to how they were before the window was broken. Society is out a window and the labor involved to replace it. Period. If you don't get it, you don't get it.

    Yglesias tries to argue that no Keynesian is proposing breaking windows. His comments feature Keynesians proposing to break windows.

  • Drax the Destroyer||

    But...But...the baker was a greedy fuck who liked to hoard his money!!!! Why should he be allowed to hoard his money for future expenses like medical care!!!! That's awful, and it means he hates his fellow man!!!! Oh, and he sells unhealthy stuff to the rubes who are too stupid (and latino, and black, and republican) to know what's good for them (overpriced organic food that goes bad in 25 minutes)!!!! He should be taxed to death so he can pay for the future medical care of the fuckers who like to break windows!!!!!

  • Tman||

    Holy shit! I think some of my brain fell out of my head when I read that Yglesias drivel.

    Someone remind me again who this guy blew in college to get a column this widely read? It's like Krugman and Alan Colmes had a baby.

  • ||

    "I think some of my brain fell out of my head when I read that Yglesias drivel."

    The last remaining bits gone, hey? Would you care to point out an *error* in what Yglesias said?

  • Tman||

    Would you care to point out an *error* in what Yglesias said?

    A more apt question is what did Yglesias say that wasn't wrong, but I'll play for kicks.

    Here's the excerpt from Yglesias in italics, and I apologize for sullying this site with his idiocy, but it's for science so relax.

    The fact that breaking windows would make a society poorer (fewer windows) is precisely why nobody ever proposes stimulating the economy by deliberately smashing windows.

    Except for those who propose stimulating the economy by smashing perfectly good automobiles instead of windows.

    But the way the dialogue works is that first a Keynesian observes that fiscal stimulus can increase growth in a depressed economy.

    And by doing so the Keynesian has made an incorrect observation. All that "fiscal stimulus" does is move money from one part of the economy to the other. There is no "stimulus". The government isn't a "company" and it doesn't magically produce goods from thin air. It's simply redistributing funds, not "stimulating".

    Second, as an attempted reductio, a conservative says “if that was true, then you could increase growth by breaking a bunch of windows.” Third, the Keynesian accurately points out that you could, in fact, increase growth by breaking windows.

    Oh. Wait, what? But I thought he'd agreed breaking windows doesn't stimulate the economy? What is he trying to say? This is a classic example of Yglesias's convoluted nonsense. You need a map just to try and understand what the fuck he's talking about.

    Fourth, the conservative accuses Keynesians of wanting to break windows or believing that window-breaking increases wealth. But nobody ever said that!

    But.....you just did...before....(brain starts dripping out)...

    The point is that we have very good reasons to think smashing windows would be a bad idea—there’s more to life than full employment—and that’s why Keynesians generally want to boost employment by having people do something useful like renovate schools or repair bridges.

    I too, would love it if we could efficiently hire construction workers to address the crumbling infrastructure in our nation, but there is a giant difference between saying I would love something to happen and whether or not I have enough money to make this happen.

    If you learn nothing else from Reason, take this point with you from whence you came-

    WE ARE OUT OF FUCKING MONEY.

  • ||

    *slow clap*

  • ||

    Meh, the SF was strong in this one

  • Ted S.||

    I was OK with your SF'ing the never-was-funny Orson Welles clapping .gif.

  • ||

    You know, "cash for clunkers" really is a great litmus test for understanding of Bastiat. Anyone who supported that doesn't get the broken window fallacy. Period.

    Where were you on that one, Gene?

  • ||

    You know I really wouldn't mind stimulus spending of the "repairing bridges and renovatign schools" type if I thought there was the slightest chance that it would be done with the greatest efficiency, to repair the maximum number of bridges and the maximum number of schools. Or otherwise allocate it optimally to the MOST USEFUL public infrastructure projects.

    But of course, that will NEVER HAPPEN, because the Keynesians we have today (you go into the recession with the Keynesians you have not the Keynesians you want) will argue with a straight face that the point of the effort is to employ as many people as possible, and that the effect of the stimulus dpends solely on how much money is spent, without regard to how much is actually produced. A philosophy which, if used to govern the management of stimulus spending virtually guarentees that the MINIMUM number of bridges will be repairted and schools renovated, sicne everyone running the damn project will think it's they job to employ as many people as possible and spend as much money as possible, instead of, you know, repairing a bridge.

  • ||

    Bravo.

  • Mr. FIFY||

    Gene, if all of his brains were gone, he'd be agreeing with Krugman without hesitation.

  • ||

    Hello Gene, hello! Where are u? He just punked you.

  • wheelock||

    Its pretty damn fascinating to watch people going into endless logical pretzel twisting contests in an argument over whether it is or is not a positive thing for acts of violence to be committed in service of the economy.

  • Heath Ledger's Joker||

    I single-handedly saved the economy of Gotham by murdering scores of people, burning a fuckload of cash, and causing millions (billions?) of dollars in damage!

    Krugman, where's my fucking check!

  • anon||

    I remember reading Marx and Keynes back in college and thinking "This makes no fucking sense."

    After reading real economists I understand why: Because their line of thinking makes no fucking sense.

  • Barack Obama||

    Had the glass not been broken, the shopkeeper could have enjoyed an intact window, plus a new pair of shoes, or perhaps a book.

    Yes, but what of Glaziers Local #344, which contributed mightily to my campaign?

  • Bureaucrat with Plans||

    To break, to spoil, to waste, is not to encourage national labour; or, more briefly, 'destruction is not profit.'

    Says you.

    *waves bulldozers through*

  • cynical||

    Part of the problem seems to be valuing changes to the rate of growth over actual overall growth in wealth. Economies can actually "grow" faster when they're just trying to catch up after losses (if you start counting from the bottom), but that doesn't mean they're going to be better off than if they had just grown steadily without losses.

    I mean, I get a boost to cellular regeneration if I cut myself badly, but if I cut myself every day, it doesn't gradually turn me into Wolverine, it just makes me an emo crybaby.

  • wulfy||

    Marginal value analysis shows that today's hiring and investment paralysis is a symptom of Economic Death by 1,000 Cuts.

    The Obama Government is ideologically committed to extort tribute, borrow recklessly, and print $ for "noble" open-ended broken window projects like inadequate health care, hunger, unemployment, lack of "Affordable" housing, lack of home ownership, lackof "security", and infrastructure.

    This Broken Window Presidency is rampaging the economy like Godzilla, and capital is being hidden or is flying offshore to escape its wrath.

    Ironically, the best things the DC earthquake could have broken were the regulatory agency buildings, the Capitol Building, and the White House, esp. if they had collapsed on the heads of theunelected bureaucrats, the Senate Dems, and the White House staff.

  • Blue sky||

    Many acts are not worth promoting, insurance or economic development can not be deformed so.

  • For Gene Callahan||

    MISTER PROSSER:
    Come off it Mister Dent, you can’t win you know! Look, there’s no point in lying down in the path of progress!

    ARTHUR DENT:
    I’ve gone off the idea of progress. It’s overrated!

    MISTER PROSSER:
    But you must realize that you can’t lie in front of the bulldozers indefinitely!

    ARTHUR DENT:
    I’m game. We’ll see who rusts first.

    MISTER PROSSER:
    I’m afraid you’re going have to accept it! This bypass has got to be built and it is going to be built. Nothing you can say or do -

    ARTHUR DENT:
    Why has it got to be built?

    MISTER PROSSER:
    Wha - what do you mean, “why has it got to be built?” It is a bypass! You’ve got to build bypasses!

  • tory burch usa||

    thank you for sharing such informative and fantastic article.

  • ||

    SCARE 20.12.2012

    (Stop Corruption And Repression Effective 20.12.2012)


    Banks were given a very important privilege to create money in the form of extending credit. This function requires diligence and careful consideration in regard to individual credit risks as well as to overall credit levels in the system. The financial crisis revealed that the banks were operating at too high a leverage and with too much risk. They were used to be saved by the Central Banks and certain that in times of difficulties the Central Banks were there to save them. They were like trained dogs and their master Greenspan or Bernanke would always be there to rescue them when unforeseen difficulties arose.


    That may be true but that does not absolve them from their obligation to monitor overall debt levels in the system as well as being diligent in evaluating the debtors ability to not only service a debt but to be able to repay it over time. The banks clearly failed in this function that is the core function of banking but focused mainly on their compensation packages. The way these bankers enriched themselves in the process of driving the financial system into a wall was appalling and the average income earner was never able to comprehend their schemes but preferred to simply ignore them. Of course, the bankers explained their outrages income levels with free market principles of supply and demand, where the best simply could be hired with those kinds of benefits only. In hindsight those superior managers seem to have missed their mark considerably. The most interesting aspect of all of this is the fact that, after we have been more than 3 years in this financial crisis, the bankers continue to loot the system as if nothing ever happened.


    True to form the Central Banks “saved” the financial system by saving those great financial institutions without whom the system would have collapsed, as was argued. Hardly were we out of the danger of collapse, the banks immediately went back to their old ways and were certain that this was a problem that would occur just once in a lifetime and now all was clear again. The real problem, however, had not been addressed but had simply been muddied.

    In actuality, the losses produced of extending unsustainable levels of credit by the banks have been transferred to the public. Different ways were chosen to achieve this task in the form of free money for the banks, injection of government funds into some institutions, increase of basic money supply and so on.


    The threat of system collapse would have been labelled blackmail if it would have occurred in another setting. However the bankers were able to influence the media, the legislators and regulators in their favour with all the financial resources available to them. Nobody was made to take any responsibility and no one was taken to account.


    This represents a serious violation of the spirit of the Rule of Law that is the basis of western society. It seems that now the new rule is Might is Right. This changes many parameters in the compass of the social system within the western world. No one can be sure on what level and when one will be subjected to the financial abuse of those elites. Presently, the people in charge are trying to enhance financial repression of which one form is to keep interest rates below the level of inflation which affects mainly those that lived within their means over the past many years; another clear violation of the spirit of the Rule of Law as it transfers losses from bad investments to the innocent and decent part of the population. In addition, the increased level of government debt puts in doubt all those benefits promised by governments the world over.


    It is interesting how the banks were able to confuse the public who was/is unable to grasp the actual situation. But considering the banker’s great financial resources, it seems not that much of a miracle to influence the media and the legislator and having politicians do their bidding. The question is what the heck can WE, THE PEOPLE do about it.


    Usually, we could address such things on a political level as we are a democracy, right? But it seems that the system has been corrupted by all the money sloshing around and it is extremely difficult to find any electable person that will act against those powerful interests. In addition, it will take many years until sufficient numbers of persons with the new thinking and with integrity not to be corrupted by those lobbying efforts will be elected to office that will implement the changes needed. So, what should we do? Start a revolution?


    Well, the blackmail used by the banks may be the only way to address the injustices that have occurred over the past few years. They showed us how to leverage one’s limited resources to achieve one’s goal. Therefore the following proposal to start the movement “SCARE 20.12.2012” should be seen in this context. The idea is that if by that time (20.12.2012) some serious injustices have not been removed from the system, people will start to withdraw their money from all financial institutions driving them into default. And it might work, because those who hesitate to support this threat may be left with no money as the banks will have to close down before all has been paid out.

    Now, what demands are made if that scenario is to be avoided.


    1. Bankers and past Bankers (all those working in the financial industry that earned in excess of $500k plus annually for more than 2 years during the past 15 years and this without any downside risk i.e. risk of financial losses, except the possibility of losing their job) have to be made personally accountable for their past activities and be removed from any such position that might directly or indirectly have influence on the money creation and lending aspects of the economy (this includes regulating agencies and politics) before 20.12.2012.


    2. Present and past regulators have to be made personally accountable for their past activities and be removed from any such position that might directly or indirectly have influence on the money creation and lending aspects of the economy (this includes financial institutions and politics) before 20.12.2012.


    3. Politicians that accept any financial support from institutions that are involved in the money creation and lending aspects of the economy will have to face a jail term of no less than 2 years without the possibility of parole.


    When these 3 points are implemented before 20.12.2012, we the public will not destroy the financial system but support the way to find back to the RULE OF LAW and away from the idea of MIGHT IS RIGHT.

  • ||

    When these 3 points are implemented before 20.12.2012, we the public will not destroy the financial system but support the way to find back to the RULE OF LAW and away from the idea of MIGHT IS RIGHT.

  • ||

  • ||

    God save Paul Krugman.

  • ||

    God save Paul Krugman.

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