We seem to be headed into an era of willful economic foolishness, so you should bring yourself up to speed on the Broken Window Fallacy. Wikipedia has an entry here. It was originally described in a typically pungent essay by Frédéric Bastiat in 1850; you can read the original French version ("Ce qu'on voit et ce qu'on ne voit pas") here, or an English translation ("What Is Seen and What Is Not Seen") here. Or you can read an Americanized version from Henry Hazlitt here. Or you can put up with my brief description:
A crowd gathers in front of a shopkeeper's shattered storefront window, which has been broken either by carelessness or malice. They decide to look on the bright side of things: surely the money the shopkeeper will spend on repair will be a great benefit! The money will go to the glass merchant and installer. This will help their businesses, allow them to employ more people, allow those people to take the spouse and kids to Disney World, which will in turn help Disney, and the merchants in the Greater Orlando Metropolitan Area. It's win, win, win, all the way down!
Bastiat said: hey, wait a minute. (In French, of course.) These would-be street economists are concentrating on the visible effects of the destruction. But they conveniently ignore the invisible effects: what would have happened with the shopkeeper's money had he not needed to spend it on window replacement. He might have bought shoes for his kids, or a couple good books, or … Each one of those purchases would have had its own beneficial cascade.
Once everything is taken into account, the broken-window universe is the poorer one; there's one fewer good window, and the shopkeeper has lost the time it took him to arrange for its replacement. There's nothing to cheer about.
This is one of those parables that, if you let it, changes your thinking permanently. It's so obvious that you start wondering: how could anyone have ever believed differently?
Ah, but they did. And they still do.
For example, my local paper, Foster's Daily Democrat, yesterday ran a story with the following headline: "UNH's Gittell: Thousands of renewable energy jobs forecast". Opening paragraphs:
New Hampshire could have as many as 25,000 new renewable energy jobs in 10 years if President-elect Barack Obama's plan to invest $150 billion in green energy is approved by Congress.Now, Ross Gittell is not only a fellow UNH employee, he is speaking within his area of expertise and award-winning employment. Whereas, I, most emphatically, am not.
"Policies make the difference in this area," said Ross Gittell, a University of New Hampshire economics professor at the Whittemore School of Business and Economics in Durham, during his presentation Wednesday at the Portsmouth Public Library.
Nevertheless: if the paper is reporting his speech fully and fairly, he is completely caught up in the broken-window fallacy. He's pointing proudly to the "seen": many new peachy jobs to be had at the tail end of the $150 billion money spigot that Obama and a presumably willing Congress will open up.
And he's diligently ignoring the "not seen": whatever that $150 billion would have done instead, had it been left in the hands of taxpayers to spend or invest according to their own lights.
An article in another local publication, Seacoast Online, also reported on Prof Gittell's talk, and is both more opinionated, and unintentionally revealing, about the stakes:
What became clear during Gittell's presentation at the Portsmouth Public Library on Thursday was that while there is a work being done by individuals, businesses and municipalities on sustainability, these efforts are not coordinated or focused on creating jobs.If I may summarize: if and when that cash starts getting sucked out of taxpayer pockets, we'd better be sure our political ducks are in a row in order to get "our share".
It is critical that some organization, perhaps the [Rockingham Economic Development Corporation, a local non-profit], create a subcommittee that brings all these efforts together in order to develop a plan for, first, getting access to the promised federal money and, second, making sure that money goes toward the development of viable, high-paying jobs in the new green sector.
And our local economy will start its grand transition from producing goods and services that people actually want, to wheedling government dependence, producing whatever the politicians think people should be buying.
Good luck with that. It's been a failure ending in poverty and corruption everywhere else, but hey, I'm sure Obama and his Democratic team will be able to make a go of it.
Supplementary reading today: George Will expounds on American-brand socialism:
Either markets allocate resources, or government -- meaning politics -- allocates them. Now that distrust of markets is high, Americans are supposed to believe that the institution they trust least -- Congress -- will pony up $1 trillion and then passively recede, never putting its 10 thumbs, like a manic Jack Horner, into the pie? Surely Congress will direct the executive branch to show compassion for this, that and the other industry. And it will mandate "socially responsible" spending -- an infinitely elastic term -- by the favored companies.He's not optimistic we'll come to our free-market senses anytime soon either.