Broken Window

by Don Boudreaux on February 9, 2016

in Seen and Unseen

This morning I discovered that the rear window of my car is completely shattered.  (I’ve no idea how it happened, although I do not suspect foul play.)  So I hired a glass company to repair it.  The repair (which will occur on Thursday) will cost me a sum just north of $500.  Explaining this unfortunate unexpected broken window just now to my GMU Econ colleagues, doctoral student Patrick Newman pointed out that what is unfortunate for me is fortunate for my fellow citizens, as my paying to have my broken window repaired will stimulate the economy.  (Paul Krugman might point out that, because unemployment remains a bit high, there is actually no cost to repairing my window.  It’s free!  That’s very comforting.  In order to be relieved of the need to fork over several hundred dollars to the glass-repair firm, I’ll try to explain to them that it really costs them nothing to repair my window.  I don’t anticipate success with that explanation.)

Of course, Patrick’s tongue is planted – Bastiat-like – solidly in his cheek.  The glass-repair company gains from my misfortune, as do its workers and other suppliers.  But the $500+ that they gain is a $500+ loss for me.

I can’t identify precisely what I will not buy now that I am $500+ poorer.  I can say that whatever it is that I will not buy is some good or service that I would otherwise have purchased in the future.  That $500+ will be withdrawn from my savings (or, more precisely, not added to my savings).  Banks will have less money to lend.  Some entrepreneur will find herself with $500 less in borrowed funds to use to start or to upgrade her firm, or some consumer will have $500 less to spend on a new car or on home remodeling, or a student will have a bit more difficulty securing at a good rate a loan to pay for college.

Stepping back, scarce resources – including labor – that will now be consumed in repairing my car’s window will not be available to produce whatever other valuable goods or services that those resources would otherwise have been used to produce.

The breaking of my window makes not only me, but all of humanity, poorer.  Either way, I have an unbroken window in my car, but now I don’t have whatever it is that I’d have purchased with the money I spent to repair the window.  Either way, the world has an unbroken window in my car, but it doesn’t have whatever else would have been produced with the resources that are consumed in repairing my window.

Obviously – and thankfully – this negative effect is so slight that I’m the only person who will notice it.  (Believe me, while I’m grateful to be able, as we say, “to afford” to pay this $500+ expense, I would much prefer that my window had not been broken and that I could instead use that $500+ in some way other than to make my car only just as useful to me as it was before the window in it was broken.)

Contrary to claims made by reporters and pundits following every natural disaster, the disaster is not good for the economy.  Never.  The world is wealthier if I have a never-broken window and whatever it is that I buy with my $500+ than it is if I have a repaired window acquired at the expense of whatever it is that I would have otherwise purchased.  For the same reason, the world is wealthier if cities and towns remain in one piece by escaping natural disasters rather than having to be rebuilt.

The fact that this fact is not widely recognized as a fact is, in fact, unfortunate.

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