Ben Zycher is flabbergasted that some Nobel-laureate economists continue to commit the broken-window fallacy. (In anticipation: the burden of persuasion is upon those who recognize that repairing broken windows is costly when 96% or more of an economy’s labor force is employed, but who also insist that such repair activities are not costly – that such activities are positively stimulative – when a mere 95% or 94% or 92.4% of an economy’s labor force is employed. This burden is a heavy one, and is not met simply by asserting that repairing broken windows requires workers and, hence, the relatively few extra unemployed workers can be hired to repair those windows without sacrificing output elsewhere. As Arnold Kling might put it, the challenge is for labor along with other resources – resources both complementary to, and substitutable for, labor – to be arranged in productive patterns of sustainable specialization and trade. The mere existence of a few extra percentage points of unemployed workers does not make this challenge any less difficult; it does not nullify basic laws of economics.)
Check out this new study by Matthew Melchiorre, for the Competitive Enterprise Institute, on European austerity. From the executive summary:
Proclamations of austerity notwithstanding, most European countries have cut neither spending nor taxes. Yet, the ones that have are now growing the fastest.