For years, Austrian economists have had to explain to standard economists that war, destruction, riots and broken windows do not bring prosperity to any country, state or city. Famous 19th century French political economist published the 1850 essay “What is Seen and What is Unseen,” which included the Broken Window Fallacy.
In his groundbreaking work, Bastiat writes about a boy who breaks a shop’s window. The owner is enraged and the town’s people gather around and give their best wishes to the businessman. They remark that he will now have to employ a window repairman, which will then stimulate the economy. Instead of spending his hard earned money on a new suit, a trip to the movie theater or a nice dinner, he will have to dole out cash to fix something that was destroyed.
Keynesian economist Paul Krugman has repeatedly stated that breaking things will lead to economic growth – he even likened a space alien invasion to economic stimulus that will end the Great Recession within several months (see this article here). Krugman has always cited World War II as proof that it ended the Great Depression, something that has been proven incorrect numerous times.
Over the weekend, thousands of people all over the country initiated riots following the not-guilty verdict in the George Zimmerman case. Although it was expected that the mayhem would be intense, the demonstrations were small but still somewhat chaotic in certain parts of the United States.
The city of Oakland has reportedly been hurt the most. The civil unrest that transpired created windows that were smashed, dumpsters overturned, fires being started, police cars attacks and statements of “Kill Zimmerman” and “Kill all cops” being written on walls.
Robert Wenzzel of Economic Policy Journal posted images of protesters breaking windows and the aftermath of the next day – InfoWars also published a series of photos. He was even able to grab a photograph of a window repair company’s truck driving around the city and noted, “But, oh wait, I also spotted what Krugman would consider the boost to the economy that will now make downtown Oakland paradise.”
(Wenzel has noted in the past, however, that Krugman might not actually understand what the Broken Window Fallacy even means: “’broken windows’ theory, in which destroying some capital can actually be a good thing under depression conditions,” wrote Krugman in a New York Times blog post last year.)
Everything that took place on Saturday and Sunday (potentially in the coming days as well) is exactly what these economists purport would produce stimulus. Only time will tell to see if Oakland businesses and the municipal government itself will come out of this better than it did prior to the weekend. They must be quite ecstatic.
So now, instead of putting up new merchandise, hiring a part-time employee, giving its workers a bonus or just donating money to a charitable cause, business proprietors will have to invest in brand new windows, which can be quite expensive, especially in this difficult economic climate.