Rebuilding After Katrina: Boom or Bust?

Walter E. Williams, in his latest column Economic Lunacy, corrects those who think cleaning up and rebuilding after Katrina will create a net economic boom:

"Bastiat wrote a parable about this which has become known as the "Broken Window Fallacy." A shopkeeper's window is broken by a vandal. A crowd formed sympathizing with the man. After a while, someone in the crowd suggested that the boy wasn't guilty of vandalism; instead, he was a public benefactor, creating economic benefits for everyone in town. After all, fixing the broken window creates employment for the glazier, who will then buy bread and benefit the baker, who will then buy shoes and benefit the cobbler, and so forth.

"Those are the seen effects of repairing the broken window. What's unseen is what the shopkeeper would have done with the money had the vandal not broken his window. He might have employed the tailor by purchasing a suit. The vandal's breaking his window produced at least two unseen effects. First, it shifted unemployment from the glazier who now has a job to the tailor who doesn't. Second, it reduced the shopkeeper's wealth. Had it not been for the vandalism, the shopkeeper would have had a window and a suit; now he has just a window."

Williams is right, of course. And so was Frédéric Bastiat. Bastiat's best-known work is probably 'The Law,' published as a pamphlet in France in 1850. It is as relevant today as it was over 150 years ago. Any lover of liberty and any proponent of individual responsibility and limited government should read it. My company has a free ebook version of 'The Law' available for you. No cost, no obligation. No salesman will call. Click here for your free download.

My favourite Bastiat quote: "Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."

Is there any wonder why I love the guy?