Poor Paul Krugman. An Internet troll stole the economist and New York Times columnist’s identity this week and posted this comment on the Internet after Tuesday’s earthquake in Washington: “People on twitter might be joking, but in all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage.” Krugman didn’t say that, but he has made the same fallacious argument so many times that neither his detractors nor his online fans could tell immediately that it wasn’t him. Days after the 9/11 terror attacks, Krugman actually did write that the attack “could even do some economic good.” More recently, he wrote this of the Japanese nuclear disaster: “And yes, this does mean that the nuclear catastrophe could end up being expansionary, if not for Japan then at least for the world as a whole.”
These true Krugman quotations express a Keynesian orthodoxy that reigns in the White House today. Such thinking inspired the “Cash for Clunkers” program, which paid citizens to participate in economic sabotage by destroying perfectly good cars. Through President Obama’s stimulus package, this theory drove the government to subsidize products no one wants (“green” energy and high-speed rail) and to solve problems that don’t exist, all in the name of creating make-work jobs that don’t meet any real market demand.
The stimulus has failed. Its millions of expected jobs never materialized. Obama’s promise that “many middle class families will see their incomes go up by about $3,000 because of the Recovery Act” has been forgotten. But sadly, the wrongheaded assumption that government can jump-start economic activity by destroying wealth, or by conjuring up mere busy work for the unemployed, lives on.
French economist Frederic Bastiat is credited with identifying the “broken window fallacy” — the mistaken belief that the destruction of a good asset (a window in his example) stimulates the economy by creating more work for someone. The belief is mistaken because it fails to account for the hidden costs. Yes, the glassmaker gets some business, but the baker who is forced to fix the window could have otherwise invested in his business or put his money to some other use more beneficial to society. To ignore Bastiat’s point and embrace the broken window fallacy is to suggest that wealth can be created without constructive effort — in other words, that you can get something for nothing. So as you set about fixing the damaged masonry and drywall in your house, think of the broken window, and of all the things you’d rather be doing with your time and money. And even if you fell for that other Krugman hoax, don’t fall for this one.
