Breaking Windows is Not Stimulating

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The stimulus package won’t stimulate the economy because it won’t create real demand. It will create artificial demand where none would naturally exist and it will draw resources from areas of real demand to pay for it. A allegory that helps us understand what is meant by this is the “Broken Window Fallacy” by Frédéric Bastiat in his 1850 essay Ce qu’on voit et ce qu’on ne voit pas (That Which Is Seen and That Which Is Unseen).

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.

If breaking windows stimulated the economy by increasing the velocity of money and by putting glaziers to work, the answer to recessions would be to break windows and have the government pay to replace them. It wouldn’t work, of course, because there would be no real demand for new windows. The demand artificially created by throwing bricks through windows simply displaces other demand. In any case, why break the windows at all? If creating work is the goal, you wouldn’t actually have to go to the trouble of breaking them. Just mandating that they be replaced would be adequate. What the Democrats are doing is the same thing. Of course, they attempt to make it less obvious.

The stimulus bill replaces 600,000 government automobiles with new, “greener” cars. The demand for new vehicles doesn’t actually exist because the 600,000 cars now in service are still functional. Replacing serviceable automobiles is no different than replacing a window that was serviceable. Designating the replacement autos “green” has the same distracting effect as actually breaking the window as opposed to simply mandating its replacement. It makes the current state seem unservicable. The law passed in the stimulus package creates artificial demand but it adds nothing to the overall wealth of the nation. Sure, it helps the auto makers in the same way that a broken window helps the glazier but, as in the case of the window, somebody is going to have to give something up to pay the bill.

That somebody is our children and grandchildren. The money being used to buy the 600,000 autos will either be paid with debt that must be paid later with interest or the bill will be paid for with inflation created by the printing of money today. Buying 600,000 autos that are not needed is a net negative for the economy and is essentially the equivalent of a brick thrown through the American window.

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16 Responses to Breaking Windows is Not Stimulating

  1. R.D. Walker says:

    In other words, there is no such thing as a god damned free lunch. Somebody is going to pay.

    The stimulus bill is designed to take money from sectors of the economy that can’t help Obama – future generations – and transfer it to those who can: the UAW for example. It is a foul and disgusting scam the American people are allowing to happen.

  2. Mad Brad says:

    Beyond that it is being paid for with money that doesn’t really exist.

    None of this makes any sense to the average person. We study this situation forward and backward and it doesn’t make sense. Eggheads with degrees try to explain it and it still doesn’t make sense. Do you know why that is? Because it doesn’t make sense, that’s why.

  3. R.D. Walker says:

    It is flat out bizarre, Brad. They are arguing that money can be collected from the citizenry against their will and spent on projects not in demand which will create little or no marginal utility and it will somehow help the economy.

    It is surreal that they can make these claims. That they do must be based on one of two views either, 1) they believe people are too stupid to make their own economic decisions or, 2) they know they are undermining the economy but believe the social result is worth the destruction it will create. Actually, it may be some of both…

    Obama is the Great Window Breaker stealing wealth from the nation for reasons of social engineering. In the allegory above, glaziers represent Obama’s base of support and shopkeepers are his opposition. Given that, his behavior makes perfect sense.

    How could this be made more obvious?

  4. Mad Brad says:

    They are engaging in the ole “Create a problem and then present something that will fix it”.

    They think that it will make us more dependent on them. That is because their perceptions of human beings are flawed. I am actually glad the economy is going to fail. When it fails, THEY FAIL…

    … BUT A COUNTRY BOY CAN SURVIVE!!!

  5. Mad Brad says:

    The Obama Head that is watching our subversive asses needs bigger ears.

  6. vanagram says:

    “TANSTAAFL”

    Was written on the blackboard by the professor of my college economics course. Went undefined an entire semester.

    I bet real revo readers know what it means….

  7. R.D. Walker says:

    “TANSTAAFL” is Rule #1… It is the universal foundation for understanding economics. It is the economic version of the Second Law of Thermodynamics.

    Of course understanding economics means understanding how humans interact and behave. If you hold the moonbat belief that human nature is malleable and can be molded and improved by institutions such as government, then you have no ability to ever truly understand economics.

    Rule #2 of economics is that human nature never changes and the laws of supply, demand and the concepts of “marginal” cost, value and utility existed in China in 1,000 B.C., in the Soviet Union in 1935, in the U.S. today and will still hold true in the god damned Intergalactic Federation a 1,000 years from now. If you can’t understand that, you have no hope of having even a minimalist understanding of economics.

    Rule #2 flows from Rule #1.

  8. AW Mens says:

    I believe many Americans (unfortunately) are at some place in their souls ok with the fact that the results of this insane spending will only negatively impact their “children and grandchildren”. Somehow they can rationalize that as being “fair”. It will only be (unfortunately) when they come to the stark realization that all this will directly affect THEM that they may apply some rational thought to the equation. That day (unfortunately) will most likely arrive long before I have grandchildren. We are talking only a few years at best before this government sponsored Ponzi scheme comes crashing down…

  9. Mad Brad says:

    AW Mens, you are correct. The changes to our financial system the Obama Administration and Congress are enacting will bring the government down because it will collapse under its own weight. It won’t take as long to get there as was required during the Twentieth Century. Things rise and fall much faster in the information age.

  10. McLaren says:

    This crap passes because of the intentional vacuum of economic education in our public school system. I went to public schools but back then it was pounded into our heads that the laws of nature are the laws of economics.

    R.D. is correct: The neo-liberal simply doesn’t understand mankind and therefore doesn’t understand how the world works. They never have, they never will. And there are just enough sheeple to be led around by the nose.

  11. James says:

    Google search results:

    Hitler sociopath = 72,800 hits
    Obama sociopath = 232,000 hits

  12. ben says:

    Completely unrelated comparison which you construed into a logical fallacy.

    It seems as though you are completely blind to economic reasoning leading to absurd and irrational claims.

  13. R.D. Walker says:

    Well, ben, you can say that but without any supporting argument for your position, you are just one more gutless drive-by troll talking shit. Man up and do something other than typing the rhetorical equivalent of “nuh uh”.

  14. Danish Bulldog says:

    Excellent application to the “green” cars phenomenon. And it was a real kick to see Bastiat quoted.

    With all that is being said in defense of capitalism lately, I wonder why writers like Frederic Bastiat, and Henry Hazlitt in the 20th Century, are never mentioned or recommended. They were great popularizers of the economics of capitalism, and should be read by everyone.

  15. Anoni says:

    The glass breaker here was the city which decided urban renewal in the commercial district was needed. They required that downtown businesses meet a certain standard, essentially forcing them to take out loans to improve the appearance of their businesses. The result? The city raised their taxes.

  16. jacksonsdad says:

    “In any case, why break the windows at all? If creating work is the goal, you wouldn’t actually have to go to the trouble of breaking them. Just mandating that they be replaced would be adequate. What the Democrats are doing is the same thing. Of course, they attempt to make it less obvious.”

    I don’t think they even want to create the “busy work” of replacing the windows. Just leave well enough alone and “redistribute” the shopkeepers revenue to the glazier. Cut out the middleman (aka “work”) so to speak.

    Like the shady mechanic who charges your battery for free but informs you that your alternator needs to be replaced. He tells you to come back in an hour…then he promptly sits down and eats his lunch while he’s writing the invoice for the $95 alternator that he didn’t purchase (but still marked up) and the $80 installation (him installing his bologna sandwich into his own fat ass).

    You just paid $175 for a free battery charge.

    That’s what this looks like to me. Maybe I’m just jaded from all the times I’ve passed DOT workers who apparently can only work one-at-a-time. I guess that “gubmint work” takes a lot out of ya’….living up to low expectations…..Uncle Sam lookin’ out for the public good.

    Best case scenario they are going to pay premium price for “gubmint work”. Like RD mentioned it’s really just a smokescreen to make the “redistribution” less obvious.

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