Tuesday, 30 October 2012

Hurricane Sandy, Keynesian Idiocy and the Broken-Window Fallacy

Here's a timely, though sad, opportunity to explain the idiotic Keynesian belief that destruction can stimulate an economy. John Keller writes on the Lew Rockwell blog,
Keynesian Idiocy
Hurricane Sandy has passed with minimal loss of human life, but swathes of destruction. Now is the time to point out the stupidity of Keynesianism, and all its calls for destruction to "stimulate" the economy. It will take billions of dollars and months of effort to regain the standard of living enjoyed on October 28th, 2012. How much better off we would be if it had never struck. This is one of the central errors of Keynesianism — that destruction can stimulate the economy, be it through war or natural disaster. It is the broken window fallacy on a scale to which even Boobus can relate. 
Here's the The Broken-Window Fallacy story by Frédéric Bastiat if you have not already read it. Ever heard the story about one prisoner digging a hole and another filling it with the same dirt? If you agree this is a futile exercise (though it is a good work-out) then you should have no problems fully understanding the broken-window fallacy and realise destruction never can be good for an economy.

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