The "Broken Windows Fallacy"

Jeff Jacoby at Boston.com writes about how in the wake of the large but weakening Tropical Storm Irene, economic "experts" will come out from under their rocks and try to reassure the public that natural disasters are a blessing in disguise.

“The result of all the new wealth creation,’’ Gardels concluded, “will be money in the pockets of Japanese.’’

Japanese who survived, that is. The tens of thousands who died won’t be pocketing any new wealth. And all the money in the world won’t make whole the countless Japanese whose minds, bodies, or careers were permanently broken by the mayhem. True, trillions of yen will be spent to repair, rebuild, and restore. But equally true is that all those trillions will no longer be available for everything they would otherwise have been spent on. Whatever Japan may gain from the resources committed to reconstruction will never outweigh the value of everything lost through wanton destruction.

Yet the conviction that devastation is really a boon never seems to go out of fashion....

More than 160 years ago, the French political economist Frederic Bastiat skewered such attitudes in a now-famous parable: A boy breaks a shopkeeper’s window, and everyone who sees it deplores the pointless destruction. Then someone insists that the damage is actually for the good: The six francs it will cost the shopkeeper to replace his window will benefit the glazier, who will then have more money to spend on something else. Those six francs will circulate, and the economy will grow.

The fatal flaw in that thinking, Bastiat wrote, is that it concentrates only on “what is seen’’ - the glazier being paid to make a new window. What it ignores is “what is not seen’’ - that the shopkeeper, forced to spend six francs on that, has lost the opportunity to spend them on better shoes, a new book, or some other addition to his standard of living. The glazier may be better off, but the shopkeeper isn’t - and neither is society as a whole.

Broken windows are not economic stimulus. Hurricanes aren’t either. There is no silver lining in useless destruction. Not even if “experts’’ say otherwise.