Sunday, May 23, 2010

A story on a Baghdad Glazier... My Bastiat Man-Crush is renewed!! :)

From BBC: Baghdad glazier picks up pieces of war...A nice contemporary example of Frederic Bastiat's "Broken Window Fallacy"---literally!  It profiles a VERY busy Baghdad "glazier" (window pane maker/installer).  It is this industry that Bastiat used as an example in the mid-1800's to illustrate the fallacy of believing that a broken window is good fortune for the glazier and for society.  What is not taken into consideration is the opportunity cost of the broken window---(1) society does not get the benefit of an intact window (resources already used and maintaining utility), and (2) the cost of repairing the window is what was NOT purchased because of  the broken window (another industry is does not receive "encouragement"). The main thesis is this:
""On the first hypothesis, that of the broken window, he spends six francs and has, neither more nor less than before, the enjoyment of one window. On the second, that in which the accident did not happen, he would have spent six francs for new shoes and would have had the enjoyment of a pair of shoes as well as of a window. Now, if James Goodfellow is part of society, we must conclude that society, considering its labors and its enjoyments, has lost the value of the broken window. From which, by generalizing, we arrive at this unexpected conclusion: "Society loses the value of objects unnecessarily destroyed," and at this aphorism, which will make the hair of the protectionists stand on end: "To break, to destroy, to dissipate is not to encourage national employment," or more briefly: "Destruction is not profitable." ""
If you have not read  Bastiat before, please give him a shot...He writes about economic concepts in very easy to understand language and relevant examples...It is worth your time if you are interested in understanding economics more deeply...
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