Thursday, August 25, 2011

"Bring on more and stronger earthquakes! It would be good for the economy!"

Nobel Prize-winning economist Paul Krugman was recently spoofed as having made such a suggestion:
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.
It turns out those words were definitely not written by Paul Krugman.

However, Krugman has made several comments virtually identical to them.

"Ghastly as it may seem to say this, the (9/11 Twin Towers) terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could even do some economic good. . . . Now, all of a sudden, we need some new office buildings. . . ." (New York Times, 14 September 2001)

"Think about World War II, right? That was actually negative social product spending, and yet it brought us out [of the Depression]." (CNN Global Public Square, 12 August 2011)

"If we discovered that space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better [off]." (Same CNN article/broadcast; note that the actual video where these comments appear begins at about 13:35 into the video in the article.)

If a Nobel Prize-winning economist can make these kinds of comments with a straight face, it should not surprise us when "regular" citizens suggest "solutions" to our economic difficulties similar to those Krugman dishes out on a regular basis. (In the referenced New York Times column, for example, Krugman wrote, "[T]he attack opens the door to some sensible recession-fighting measures. For the last few weeks there has been a heated debate among liberals over whether to advocate the classic Keynesian response to economic slowdown, a temporary burst of public spending. . . . Now it seems that we will indeed get a quick burst of public spending, however tragic the reasons.")

Check out this brief, well-done video about The Broken Window Fallacy--a fallacy first noted by Frédéric Bastiat in 1850:

For a further nuanced discussion of the limitations of The Broken Window Fallacy (because there is a point at which one does want to see some broken windows!), please read the Wikipedia article on the subject, and especially Section 2.2, Limitations. . . . But keep reading through 2.3, The opportunity cost of war and 2.4, The cost of special interests and government.

Kind of mind-blowing!
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