The broken window fallacy: Hurricane Matthew can not have good outcomes

As the U.S. East Coast gets hammered by a hurricane, the economically illiterate urge people to look on the bright side, as if hurricanes had silver lining. They say it’s a good thing, the upside to crazy destruction is the creation of jobs and opportunities for laborers.

Nothing could be further from the truth and this sort of flaw in logic is so common it has its own name, the fallacy of the broken window. Broken windows are good for the glassmaker, if a bakery’s window gets broken by mischevious vandals the baker will put more money into the local economy by getting his window replaced.

From a superficial level it’s almost understandable, where a glassmaker once had no business, he now has more and will use his newfound wealth to buy something else, circulating more dollars into the economy.

The problem is people only see things on a superficial level and don’t think about what isn’t, what has been prevented – namely, what would the baker have spent the money on. By needing to replace the window, the baker cannot spend money on other things. The baker’s money would have circulated just as well as the glassmaker’s, and no perfectly good windows need to be destroyed. The baker could have invested in tools to be better at baking, to be more productive and create more goods for less cost but is instead saddled with a burden, delaying increased efficiency or foregoing other goods.

Hurricane Matthew is just one big gigantic mess of broken windows. People may look at the recovery and rebuilding, thinking of all those people that wouldn’t otherwise have jobs and think that hurricanes stimulate the economy. Yes, people will be hired to rebuild houses but at what cost? There is no possible way to say that the best use of resources are to destroy things and rebuild. The best use of resources is to maintain what exists and invest in progress.

Take the logic of broken windows even further and things really start to fall apart. Maybe to really get the economy going, there should be constant destruction. If there are not enough hurricanes, maybe the government can hire roving bands to burn down houses. Not only will the people repairing the damage have a job, but people causing the damage will also be gainfully employed. Is there even such a thing as too much destruction?

Of course, acts of nature are not preventable and aren’t equivalent to a conscious act of destruction but the fact remains that there is no benefit from destruction of any sort.

It’s just another example of how vital basic economic principles are not taught and how misconception reigns. It may be called the dismal science but it’s absolutely staggeringly important in our everyday life.

The broken window fallacy is just one of many deeply held misconceptions by the public. Economic stimulus, government creating jobs, minimum wage laws, the gender pay gap, government subsidies, artificially manipulating interest rates, all are economic absurdities that the public goes with because they simply don’t know any better.

Only through studying economics will people learn just how ridiculously mismanaged the country is. Politicians don’t care about sound economics, they care about voters being happy and the appearance of economic growth. What is unseen is ignored by the people and therefore ignored by politicians.

It’s the responsibility of every person to learn for themselves how the world works and only then can they demand proper solutions from those in charge.

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