Sept. 27 – Broken Windows

Gay Lynn HillBell Ringers, Economics(BR)

On Sept. 27, Hurricane Inez slammed into the Caribbean, then Florida, and on into Mexico. About 1,000 people died. At the time, it was the strongest Hurricane recorded.

When natural disasters strike, people sometimes argue that despite the human tragedy, there is a bright side: “Look at all the jobs that will be created!” This is an example of what is known as the “broken window fallacy”, first popularized by French economist Frederic Bastiat. Bastiat noted that what we see, the new work created for builders, electricians, and providers of all the goods that need to be replaced, is only part of the story. The unseen part is all the other jobs that would have been created with the money now going into reconstruction. These might be jobs for ticket-sellers in movie theatres, vacation sites, or other things that people no longer can buy because they are repairing damage.

The things lost in a natural disaster are just that – lost. The things supposedly gained – new jobs, are, in fact, just a surface phenomenon. In fact, jobs are shifted around, but not created. But wealth is really lost.



Questions:
  1. Have you ever heard this “look on the bright side” argument for destroying property? What was it about?
  2. Following the start of the Great Recession, there was a program called “cash for clunkers’, which offered owners of used cars cash to buy new ones, if they allowed their old ones to be destroyed. The program was designed to help the auto industry. How was it an example of broken-window reasoning? Do you think it improved the economy overall? Whose livelihood would have been harmed by a shifting of jobs into the new car industry through this program?

Image Citation:

27, Sept. 1966 Hurricane Inez [Digital photograph].  Retrieved from <gettyimages.com>.