In his classic Economics in One Lesson, Hazlitt uses the simple example of someone breaking a window to disprove the notion that this is good for the economy. True, the broken window will provide a job for the repairman, who, in turn, purchases equipment from someone else in order to complete the job. Those who claim that war is good for the economy make similar claims about how the defense industry and military spending will create jobs.So, war might be good for individual companies, but on the whole it's bad for the economy.
However, these claims are just as fallacious as claims that a broken window creates jobs. In the case of the window, the argument completely overlooks the impact on the homeowner, who must now dip into savings or curtail spending in order to cover the costs of repair. The homeowner is worse off because resources have been diverted away from planned expenditures or savings simply to return the house to its previous condition. At best, the broken window created no new jobs or wealth, it simply switched the beneficiaries of the homeownerâ??s budgetary decisions. At worst, it means that the homeowner had to forgo investment decisions that would have helped to expand the economic pie rather than reapportion the existing slices.
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posted by hama7 at 9:47 PM on August 25, 2002