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EDITORIAL: Asteroid stimulus
Broken windows in Russia won’t lead to prosperity
Question of the Day
Great rocks have tumbled from the sky since there was an Earth for them to tumble on, but the asteroid falling in Russia’s Ural Mountains was the largest caught live on film. Dramatic footage shows pieces of a 10,000-ton cosmic object streaking through the atmosphere, glowing brighter than the sun. The impact set off a shockwave that shattered windows and damaged buildings, injuring more than 1,000 thoroughly frightened Russians.
It was bad news for everyone — except economists of the sort found in government and the ivy-covered tower. Devotees of British economist John Maynard Keynes perked up on hearing the news from Siberia, since they believe catastrophic events can be a good thing. Acts of nature encourage government to open up the money pot and spend it on repair, which they imagine is economic growth. No less an authority than Larry Summers, who is President Obama’s former top economist and a Harvard professor, once told a CNBC interviewer that the earthquake and tsunami that rocked Japan two years ago “may lead to some temporary increments ironically to [the gross domestic product] as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake Japan actually gained some economic strength.”
Three days after the deaths of 3,000 persons in the terrorist attacks on New York on Sept. 11, 2001, Paul Krugman, the Nobel economist and a columnist for the New York Times, said the crime was an employment boom. “It seems almost in bad taste to talk about dollars and cents after an act of mass murder,” wrote Mr. Krugman, bad tastefully. “Ghastly as it may seem to say this, the terror attack — like the original day of infamy, which brought an end to the Great Depression — could even do some economic good.”
Mr. Krugman stepped further into the deep end in 2011, suggesting a fake disaster could be even more beneficial. “If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months,” he told CNN. “And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better … .”
These far out economic theories show the “broken window” fallacy is still with us. The 19th-century version recounts the tale of the boy who accidentally shattered the front window of his father’s shop. The shopkeeper ordered a replacement and the glazier, on finishing the job, patted the boy on the head in gratitude. The incident did indeed provide the maker of the glass with money to expand his business, and this put money in circulation. But this superficial analysis leaves out the unseen destruction in wealth and opportunity for the shopkeeper, who was unable to use the money he spent for a new window on new shoes. So instead of having new shoes and a window, he got only a window.
Keynesians believe there’s no better place for money to go than the hands of government “experts” like Messrs Summers and Krugman, who decide where it can be best put to use. This economic theory pervades this administration. As long as Mr. Obama’s economic team roots for tsunamis, terrorist attacks, alien invasions and falling rocks, we’re not likely to recover any time soon.
The Washington Times
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