Of Broken Windows and Broken Policy

Michael Sykuta —  30 October 2009

Today the Obama administration announced with great pride that its economic stimulus plan created or saved about 650,000 jobs.  “Thank goodness!” reads the subtext.  If not for all those new and protected jobs, the unemployment numbers would be really bad!

It appears no one in the administration’s economic advisory team has heard of Frédéric Bastiat.  He wrote an essay titled Ce qu’on voit et ce qu’on ne voit pas (That Which Is Seen and That Which Is Unseen).  In his essay, for which he has received some notoriety, he explained the parable of the broken window :

Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—”It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?”

Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.

Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier’s trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.

But if, on the other hand, 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.”

It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.

Is this some new economic insight? Some innovative wisdom that is too fresh to have influenced our federal policies? Sadly, no. Bastiat published his essay in 1850.

Economists of any merit have long rejected the sort of cheap “analysis” fronted by the White House. Opportunity cost (that which is hidden) is one of the most fundamental concepts in economics. Unfortunately, our national leaders and their economic advisers have little care for (or benefit from) taking that most fundamental concept into account when attempting to justify their broken policies.

But if you’re not convinced and wish to further stimulate the economy, follow the Obama administration’s lead (and Bastiat’s foil): Take a brick and throw it through your front window.  Pay someone to fix the window.  You just created a new job!

2 responses to Of Broken Windows and Broken Policy


    Obama apologists would answer back, well, first of all, the value of a job today may be higher than the discounted present value of a different, even if more productive, job tomorrow. They would also say, “haven’t you heard of the velocity of money?” If the choice is between mattress stuffing and paying to dig and refill ditches, we’re better off with the latter. I think both of these are wrong, in part for Bastiat’s reason (because even if they are taking account of opportunity cost (which often they are not), they are probably discounting it far too heavily) but more because of the various costs of government allocation of resources ranging from rent-seeking to harmful industrial policy to process inefficiency, to government aggrandizement, etc., etc. These costs they discount completely–or even count as benefits.

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    […] Update: My colleague Mike Sykuta beat me to it. […]