Eagles and broken window fallacies

Eagles and broken window fallacies

My friend Zach from Valentine sent me this article.  It’s the story of a bald eagle which smashed through the window of an H&R Block office in Virginia. Zach’s question to me was this: Was the eagle protesting taxes, or stimulating the economy?

I, of course, think that the eagle was protesting taxes, but Zach’s reference to the broken window refers to a parable introduced by Frederic Bastiat.

The parable seeks to show how opportunity costs, as well as the law of unintended consequences, affect economic activity in ways that are unseen or ignored. The belief that destruction is good for the economy is consequently known as the broken window fallacy or glazier’s fallacy.

If you’re not familiar with the “broken window” usage in economics, you should know that the theory has become much of the basis for those who say “war is good for the economy” (those who say that it took WWII to pull us out of the Depression, for instance), and that spending on the military is good for the economy.

We also hear things like “wow, that hail storm really provided relief for the construction folks who were hurting.” That, of course may be true, but Bastiat would say that the temporary gain for the construction folks don’t justify the loss of value that property owners (or their insurance companies) had to bear, because the money to repair or replace something that didn’t need to be replaced is just money that can’t be spent somewhere else in the economy.

More than you wanted to know about the “broken window fallacy”, but Frederic Bastiat’s The Law is really something everyone should read (at least) once in their lives. And fortunately for us, it’s available broadly in PDF format for free AND it’s a relatively short essay, easy to read in an hour or two. 

And really, I think the eagle was just protesting taxes. I doubt he’d buy the “broken window” theory, and is much more in tune with Bastiat! 

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