Help! Take My Wallet!

The trembler that rocked the nation’s capital yesterday has stimulated more discussion about how disasters might actually be good for the economy. Katherine Mangu-Ward has a nice blog post dispelling the myth with a nice explanation of Frederic Bastiat’s parable of the broken window, the economic effects of the “seen and unseen,” and a few relevant tidbits of the unseen from today’s newspapers. As Katherine explains the parable:

A shopkeeper’s son breaks a pane of glass and a crowd gathers. Well-meaning pedestrians find a silver lining to the accident: “Everybody must live,” they say, “and what would become of the glaziers if panes of glass were never broken?” Bastiat cautions that if “you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, ‘Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen.’” The six francs the man must spend to repair the glass are now gone. Had the glass not been broken, the shopkeeper could have enjoyed an intact window, plus a new pair of shoes, or perhaps a book.

It’s worth a look as a quick, readable refresher on the fallacy of the absurd notion that simply spending money is in itself an economic benefit.

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