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Hurricanes and Broken Windows


Hurricanes and Broken Windows

Surely, a natural disaster should never be cause for callous humor.  The combined cost of lives and livelihoods of those affected in such tragedies can often yield emotional and physical burdens for undue lengths of time.

Although Hurricane Irene failed to live up to the hype of early prognostications, the damage that did occur should not be overlooked and hopefully the inroads to recovery will be speedy and effective.

Having said that, this is an opportune time to expound upon the "broken window fallacy" as it pertains to current events.


You may have heard the argument that World War II was the lubricant that helped to end the Great Depression.  Though this argument has been discredited in many forms, it remains popular in Keynesian circles.  A nutshell explanation of the "broken window fallacy" is this: an event or circumstance, though destructive in nature, can help the economy by providing jobs and promoting business spending.  This argument has been rehashed in various forms over time, though most recently by Nobel Laureate and Princeton University Professor, Paul Krugman.  Krugman stated in a CNN interview that the U.S. economy could benefit by allocating resources to prepare for a space alien invasion.  While Krugman's actual concern for alien invasion may not be pressing or even serious in the least, the salient point to be had is that aggregate spending on a planned initiative will create boons to the economy, regardless of the overall useful value of the product.  

"Value" is most assuredly the fulcrum in this dispute.  To be sure, Keynesians assert that value can be found in wealth redistribution, inflation, and centralized economic control.  In fact, centralized control is the penultimate spring upon which all other aspects of the Keynesian philosophy originate.  And so it is that any equation, measurement, or policy instrument is only as valuable to the Keynesian as the amount it emanates from and supports this megalomaniacal social-complex.

Disaster preperation and recovery are both perfectly reasonable pursuits, and necessary to sustained progress.  Nobody is questioning the necessity of these methods, but it is important to realize that they are at best a "necessary evil" and at worst, an over-inflated misallocation of resources.  Digging a hole in the ground and filling it up again may provide jobs and spending temporarily, but society will be no better off.  This sort of economic pursuit is completely unsustainable, unless of course, the goal is to sustain servitude.

The reality is that, left to their own devices, inane endeavors to promote "economic stimulus" would be futile and likely irrelevant on a grand scale.  Unfortunately, Keynesian policies have been imposed upon our society very thoroughly.  To suggest freedom in the marketplace and competition for economic services is to undermine the rubric of control and is therefore dismissed as "non-serious", "kooky", or even blasphemous.  The Keynesian modus operandi depends on force of government to sustain control, because in a free environment it would never survive.


Human prosperity is a positive outcome.  It is an independent value that does not derive from destruction, whether through war, natural disaster, or pre-emptive space alien fortification.  Though prosperity can indeed blossom in spite of destruction, it should never be confused as an integrally entwined combination.  In a world with scarce resources, we should be employing those resources towards ends that will provide the best quality of life for humanity; truly productive ends.  Things like health innovation, data management, and communication technology have all flourished in recent years because these things are positive, valuable, and helpful to society.  When a hurricane strikes, we need to redirect resources away from these productive ends to rebuild to our previous level of comfort.  While wars and disasters may very well always plague our world, we should view these occurrences as unfortunate setbacks, not economic opportunities.  An economic outlook without regard for true prosperity is one that is disconnected from the reality of what it means to be human; space alien invasions notwithstanding.  


**It should be noted that Paul Krugman did not explicitly state that Hurricane Irene would benefit the economy, although there was some controversy surrounding the issue.  The point of this article and the inserted image is to call attention to the perils of the broken window fallacy, which Krugman has fallen victim to throughout his career.  As a lead spokesman for the Keynesian school of economics, his previous statements provided plenty of context from which to induce correlation.


Krugman on World War II

Krugman on 9/11

Krugman on Space Alien Invasion


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