A young boy walking down Main Street amuses himself by tossing a small rock into the air and catching it. When he spies a small, flat stick in the gutter he gets an idea. This time, as the rock begins its downward descent, he gently flicks at it with his makeshift bat.
After missing, his next attempt connects, sending the pebble sailing. He didn’t expect it to travel so far. The sound of breaking glass is heard as the large window of a nearby business halts the stone’s forward progression. The boy vanishes into a nearby alley.
After discovering the cause, from a passerby who witnessed the event, the shopkeeper begins cleaning up the glass while his customers lament over his bad luck. Then someone, looking for a silver lining in the gloomy situation, points out that despite the misfortune, this will actually create work for the window repairman – isn’t that a positive development? Suddenly the mood changes. What at first seemed like pure tragedy has now become an opportunity.
Fortunately, someone with a bit more wisdom brings things back to reality by asking, “If breaking windows is somehow beneficial because of the work it creates, couldn’t the benefit to society be greatly expanded if windows all over town were broken? And why stop at windows? Think of all the jobs and work this would create!”
Stated this way, it quickly becomes obvious that this line of reasoning is flawed and ludicrous. But a few customers are still scratching their heads. The concept that destruction could somehow have a positive impact on labor and production, sounded reasonable.
People are strongly influenced by what they see. In this case they see the employment and money the glazier will receive for replacing the broken window. What they fail to see, or bring into the equation, is where that money would have gone had the shopkeeper not been forced to spend it on replacing a perfectly good window.
The glazier’s gain is offset by a loss to the tailor, shoe maker, restaurant and department store owner. Some might see this as a wash, where the money was simply diverted to the glazier instead of the tailor, but it’s worse than that, because the expenditure only returned the shop keeper to his previous condition – that of having a window. The community’s tangible assets were decreased, not increased.
It matters little whether destruction is accidental or intentional, whether it comes from vandalism, nature, terrorism or war, the outcome is the same – resources are lost. With few exceptions, the destruction of property does not result in beneficial gains.
This principal also applies to stimulus spending and the illusion that government can actually create jobs (or wealth). If you only pay attention to the inflow, or where the money is going, and you ignore where it came from, it will appear as a positive development.
What is usually ignored, or at least blurred, is the answer to the question, “where did the money come from in the first place?” Taking money from one segment of society and giving it to another does not result in a net gain.
It would be foolish to try and raise the level of water in a pond by scooping up water from one end, walking around to the other, and pouring it out. But if all you see is the water being poured into the pond, it is easy to believe it will work. Factors such as the size of the implement extracting the water (a teaspoon) or dispensing it (a tanker truck), the quantity of loads being poured, the number of people involved, what the motives or objectives are, makes absolutely no difference to the end result.
The situation is not improved by paying those involved in this futile “make work” project for their labor. There is a difference between employment (doing busy work) and productivity (producing something of value that people want).
If you pay attention to the news, you will notice these economic myths are alive and well. They are repeatedly resuscitated, dressed up in fancy garb, and paraded before us for all to admire. If you fail to take into account the unseen factors, they will even seem credible.
It’s time we stopped being manipulated by economic magicians who use sleight-of-hand reasoning to make us see what they want us to see (what they provide us) and ignore what they don’t want us to see (what they take from us). It’s time we let these myths expire, give them a proper burial, and be done with them once and for all.