Lately our good friend Daniel Kuehn has been beside himself over the anti-Keynesians’ allegedly improper use of Bastiat’s broken window parable. The classic statement comes from this post, where Daniel declared, “Nothing convinces me you don’t understand what Bastiat wrote more thoroughly than accusing Paul Krugman of having committed a Broken Window Fallacy.”
Anyway, I bring it up now because this seems to be something that not only Daniel, but also Matt Yglesias, are hitting repeatedly. Perhaps sensing the rhetorical power in accusing Keynesians of falling prey to a fallacy exploded in the 1800s–after all, that’s why it stings so bad when Krugman accuses his opponents of ushering in a “Dark Age of Macro”–Daniel and Yglesias try to spin the whole thing as yet another example of sloppy thinking by the free-market guys. In the latest episode, Daniel praises Matt Yglesias for saying that shoplifting will create jobs. (See, we don’t need to fake alien invasions after all.)
I’ll let you go read the logic behind that one, but what interests me in the present post is how Yglesias introduces his post: “Conservatives persist on not understanding the point about broken windows…” In his earlier post on the same theme, Yglesias opened up by saying:
Few myths are as persistent as the idea that Keynesian and monetarist thinkers fail to appreciate Frédéric Bastiat point about broken windows. As even a cursory examination of efforts to apply Bastiat’s ideas to the conditions of a depressed economy will show, the so-called “broken windows fallacy” is not a fallacy at all, just a special case.
Where Daniel and Yglesias are coming from, is to make a distinction between wealth and employment. “Sure,” they concede, “everybody admits that breaking stuff makes us poorer. But it’s not a ‘broken window fallacy’ to say that breaking windows can boost employment.”
Well, regardless of your opinion on that claim, I want to point out that Bastiat didn’t agree. Here is his original (translated) discussion:
Have you ever witnessed the anger of the good shopkeeper, James B., when his careless son happened to break a square of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation – “It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?”
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier’s trade – that it encourages that trade to the amount of six francs – I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! your theory is confined to that which is seen; it takes no account of that which is not seen.”
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.
Let us take a view of industry in general, as affected by this circumstance. The window being broken, the glazier’s trade is encouraged to the amount of six francs; this is that which is seen. If the window had not been broken, the shoemaker’s trade (or some other) would have been encouraged to the amount of six francs; this is that which is not seen.
And if that which is not seen is taken into consideration, because it is a negative fact, as well as that which is seen, because it is a positive fact, it will be understood that neither industry in general, nor the sum total of national labour, is affected, whether windows are broken or not.[Bold added.]
There is no ambiguity in the passages I’ve put in bold. Bastiat is clearly saying that not only would it make the community poorer, but that it would not stimulate industry or boost overall employment, if somebody smashed a window. (Presumably repelling an alien invasion or replacing shoplifted goods wouldn’t give a different answer.)
So if Yglesias and Daniel Kuehn want to say, “Modern conservatives/libertarians should stop citing Bastiat’s broken window ‘fallacy’ because he was wrong; he assumes full employment which is the mistake all the classicals make when it comes to macro,” then OK fine. We can have that argument.
But they should stop accusing modern free-market folks of misapplying the lesson. To say that shoplifting or alien invasions can help employment is exactly the “broken window fallacy” as spelled out by Bastiat.