Bastiat elaborated further in his "Broken Window Fallacy" parable where a vandal smashes a shopkeeper's window. A crowd forms, sympathizing with the shopkeeper. Soon, someone in the crowd suggests that instead of a tragedy, there might be a silver lining. Instead of the boy being a vandal, he was a public benefactor, creating economic benefits for everyone in town. Fixing the broken window creates employment for the glazier, who will then buy bread and benefit the baker, who will then buy shoes and benefit the cobbler and so forth.
Bastiat says that's what's seen. What is not seen is what the shopkeeper would have done with the money had his window not been smashed. He might have purchased a suit from the tailor. Therefore, an act that created a job for the glazier destroyed a job for the tailor. On top of that, had the property destruction not occurred, the shopkeeper would have had a suit and a window. Now he has just a window and as a result, he is poorer.
After the 2001 terrorist attack, economist and Nobel Laureate Paul Krugman wrote in his New York Times column "After the Horror," "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 do some economic good." He explained that rebuilding the destruction would stimulate the economy through business investment and job creation.
Do a simple smell test on these examples of economic lunacy. Would the Japanese economy face even greater opportunities for economic growth had the earthquake and tsunami also struck Tokyo, Hiroshima, Yokohama and other major cities? Would the 9-11 terrorists have done us an even bigger economic favor had they destroyed buildings in other cities? The belief that society benefits from destruction is lunacy.
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