Saturday, February 7, 2009

Broken Windows and the Unseen

I happened across an interesting chart earlier this week. With all the back-and-forth about the next Great Depression one is tempted to look at the years 1930 to 1940. What is really instructive are the years 1941, '42, and '43. We might conclude from this chart that WW II was a wonderful time.

And, why not? Employment was at an all time high; anyone who wanted a job could get one. Real wages rose as a large part of the labor force was directed into unproductive endeavors, never to return. Exports were, well, booming. (Pun intended). There are some who say that war is good for an economy; and the bigger the war the better. These people, needless to say, are idiots. Economics, like everything else, is ultimately about people. Numbers are only a reflection of the lives people are living, and sometimes that reflection can be a poor one.

Another trail I followed led to Frédéric Bastiat and his Broken Window Theory. Briefly, it is the story of a shoemaker's son who one day breaks a window at the shop. All the neighbors agree that fixing a broken window has many benefits, one of which is that it provides a job for the glazier. Left unseen, is the productive use the money paid to the glazier might have gone to. Bastiat goes on to argue that any ruler can immediately double employment simply by cutting off the right hand of everyone in the kingdom. (I need to find out more about this guy).

Today, there is general agreement that the Bush bank bailout was an unproductive use of our national wealth. The folks in Washington seem determined to try something similar in other areas. All manner of numbers are being tossed around to "prove this, and "prove" that. No doubt, there are some bridges that need fixing, and reducing the long term energy costs of government buildings seems reasonable enough. Still, those of us who continue to "stand athwart history yelling stop" can only look on in sadness. Our leaders have been foolish. There are precious few left to count the unseen costs of fixing our country's broken windows. Who will ask, "What future improvement will be left undone because we used our money recklessly today?"

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