A few days ago I wrote a little post on the importance of hats. The reflection which this occasioned inspired me immediately to walk uptown and find myself a new Greek fisherman’s hat to replace the one which last winter I accidentally left behind in a local diner, where it was probably mistaken for food.
There is a fine hat shop along Philadelphia’s famous South St. shopping area, and with Saturday’s weather being unseasonably dry with a dash of September in the air, I headed out on foot, confident that I would find everything that I needed. I arrived at the hat shop, and the same lad of whom I spoke in the previous post on hats was there, waiting to help me. I spoke to him briefly and came to find out the dreadful news: there were no Greek fisherman’s in the store. The clerk pointed me in the direction of another place or two that might, which happened to be about 20 blocks in an entirely different direction. So off I went, and, after what was becoming a long afternoon of walking, arrived at my destination. Nothing anywhere.
By this time, a few hours had gone by, and I needed a restroom, so I stopped into the bookstore along Rittenhouse Square, where the lavatories are perhaps the best feature. On my way out, I stumbled upon Barry Goldwater’s The Conscience of a Conservative, on sale for something like $6, so I bought it.
Now I was thirsty. Off to Starbucks to get an iced tea and read this damn book that I didn’t need. By now, the orange glow of early evening had begun to descend on the city, and I started to add up the cost of my day. Firstly, I spent hours on this ultimately futile quest for a new hat when I could have been doing much more productive things. More than that, however, I also spent nearly $2 for an iced tea and $6 on a book. And I haven’t even come close to replacing the hat yet.
What my frustrating August afternoon demonstrated was the untruth behind what is called the Broken Window Fallacy. The more unreflective economists of our society have posited at various times that, when some sort of misfortune strikes–war, natural disaster, or even something as simple as a broken window–there is economic benefit that comes from the efforts to recover what has been lost or broken. Frederic Bastiat–one of my favorite characters, and no mountebank, he–disproved this absurdity just about a century and a half ago already. Few people have heeded the lesson, however. Take the conventional wisdom about war, that it helps the economy. Perhaps this superstition began during Roosevelt’s War in the 1940′s. In any case, it’s dead wrong.
As an example, consider my circumstance. I lost a hat that was worth, say, x dollars. In order to replace it, I will need to divert x dollars that could have been used for something else entirely. In order to replace item a I have given up item b since, like most men’s, my resources are limited. In addition, there is the time I spent on a fruitless search for said hat (5 hours), and which I will once again be required to invest if I ever intend to bring a satisfactory solution to my quandary (we will call this additional time, t). This gives us a formula that might be used to show the ridiculousness of the Broken Window Fallacy:
y (the resources needed to replace the hat) = x + b + 5 hours + t
If that seems lopsided to you, you’re right, and that’s the heart of this fallacy. I have not even included the cost of that iced tea and the jackass-ery of Barry Goldwater, which I’ll approach in a future post. These costs were, one could say, unnecessary, but given that economics is the study of what man tends to do rather than what he ought to do, there would be some justification for adding them to the formula above as well.
So, the next time some Statist kicks up his FDR-inspired self-righteousness about the economic benefits of war, tell him about my hats, and give him a list of the Best of Frederic Bastiat.