The Durk Pearson & Sandy Shaw®
Life Extension NewsTM
Volume 12 No. 3 • June 2009


Quack “Economics” in a Major Science Journal

Robert Costanza, director of the Gund Institute for Ecological Economics at the University of Vermont, Burlington, Vermont, wrote the following as part of his comments in a book review (“Could climate change capitalism,” Nature, pp. 1107-8 (April 2009):

There is evidence in developed countries that economic growth beyond a certain point does not improve well-being, owing to the hidden, external costs of that growth, including climate impacts. For example, an oil spill increases gross domestic product (GDP) as someone must pay to clean it up, yet it detracts from well-being. Increased crime, sickness, war, pollution, fires, storms and pestilence are all positive for GDP because they increase economic activity.

D&S Respond: This is totally spurious, yet has unbelievably passed the editors of Nature. It is a horrible reminder that so few understand economics, including those who apparently understand complex scientific issues (though not necessarily without bias when politics and government grants are involved). This purported “ecological economist” (as well as the editors of Nature) do not understand one of the basic elements of economics concerning the creation and destruction of wealth. This was explained masterfully by the 19th century economist Frederic Bastiat (1801–1850) in the fallacy of the broken window in his 1850 essay “That Which is Seen and That Which Is Unseen.”

The Fallacy of the Broken Window

Bastiat described the fallacy that, by breaking a window, a vandal could create increasing economic activity because the owner of the broken window would have to hire somebody to fix it. The glazier who fixes the window would then have money to spend on something else, the recipients of that money would be able to spend it on other things, and so on and so on, resulting in a spiral of increasing economic activity. This is a fallacy, Bastiat explained, resulting from the failure to distinguish the seen from the unseen. What you see is the economic activity resulting in the fixing of the window, but what you don’t see is the economic activity that would have taken place in the absence of the broken window. The overall wealth in the economy would have been greater if the window hadn’t been broken because there would not only be the value of an unbroken window but that which would have accrued from the spending of money for other values rather than fixing a broken window.

It is horrifying that Nature would publish an article by a purported economist who actually believes that war, sickness, pestilence, pollution, fires, storms and, by analogy, broken windows, are a source of increased economic activity (wealth) in a society. That Nature’s editors would accept and publish this insane assertion without any documentation, as if it were simply self-evident, is itself extremely frightening.

The economic know-nothings live in a different world than you do and they are positioning themselves to impose their vision on your world.

There is an excellent write-up on the “Parable of the broken window” in Wikipedia. (We read Bastiat’s arguments—in English translation—on the broken window fallacy 40 years or so ago, but it is nice to know that the argument is now so readily available. You can read it at: http://en.wikipedia.org/wiki/Parable_of_the_broken_window.) Another source of information on the parable is found in economist Henry Hazlitt’s classic “Economics in One Lesson.” A discussion of the parable would make a wonderful lesson for a junior high or high school class. Even kindergarten kids could understand it: http://www.amazon.com/Economics-One-Lesson-Shortest-Understand/dp/0517548232/

Even the latest Nobel Prize winning economist appears to have made the broken window error! According to the Wikipedia write-up on the “Parable of the broken window,” Economist Walter E. Williams and commentators Jonah Goldberg and Robert Tracinski accused economist Paul Krugman of committing the broken-window fallacy soon after the September 11, 2001 attacks. Krugman wrote: “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. […] the driving force behind the economic slowdowns has been a plunge in business investment. Now, all of a sudden, we need some new office buildings. As I’ve already indicated, the destruction isn’t big compared with the economy, but rebuilding will generate at least some increase in business spending.”1 Here a Nobel Prize winning economist appears to be suggesting that blowing up the Twin Towers was a benefit to the economy and, by logical inference, if there had been even greater destruction (a few more buildings, say), it would have been an even bigger boost to the economy! Why not just blow up the entirety of New York City!! Think of all the building projects and job openings you would “create”!!!

Reference

  1. This was discussed in Walter E. Williams’ syndicated newspaper column “There’s no free lunch,” http://www.jewishworldreview.com/cols/williams100401.asp.

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