Blowing Up a City in the Name of Economics

Yes, dear reader, your editor is snowed in. Not for the first time this winter.

And we’re not the only ones. The US government is shut down too. No matter. They weren’t doing anything but making things worse.

But wait…what’s this?

The Washington Post: “Blizzard or not, top Treasury staff is snowed in – with work.”

Uh oh. The folks who run the economy for us are still on the job.

“Geithner, aides skip day off to tackle economic clouds.”

We have to confess; we’ve never seen a US Treasury official tackle a cloud. We can’t quite imagine it. But it’s in the paper, so it must be true.

Of course, there are plenty of economic clouds around. Heck there are plenty of real clouds, too, dumping snow on the Washington area. Politicians and bureaucrats can’t really do anything about either type of cloud. But it must be a comfort to the woodenheads to think they are on the job. We’d rather they took the day off – and tomorrow too. And the next day!

What a godsend this snow is! Think of all the people it puts to work. Kids shovel out driveways and earn a little spending money. Snow-blower sales must be going through the roof. Four-wheel-drive vehicles are sliding out of lots and showrooms…work crews keep busy night and day – with huge overtime earnings, no doubt.

And think of all the missed work…and school…that will have to be made up.

You’re probably thinking…now, wait a minute. There’s something wrong with this picture. How could something as destructive and expensive as a blizzard be good for the economy?

Well, you’re just not thinking like an economist. You have to learn to stand on your head. Then, things are turned upside down.

Of course, a storm is not really good at all. But simpleton economists believe that anything that puts people to work is a good thing for the economy – even a world war.

What really happens in a storm…a blizzard…a flood…or a war is that real wealth is lost. Things break down or are destroyed or used up. And then a lot of resources must be put to work to make repairs. Putting these resources to work in a concerted way makes it look like progress…but you’re really only getting back to where you were in the first place.

Besides, the resources must be taken away from other things. The demand for snow-blowers displaces the demand for motorcycles or jet-skis. Workers who move snow might otherwise be making pizzas or delivering newspapers. And the fuel that goes into the salt trucks and loaders…that too, would have been used for something else – something people wanted to do, not something they had to do.

The early French economist, Frederic Bastiat, figured this out a long time ago. He called it the ‘broken window fallacy.’ Even then, some lazy economists thought that breaking a window actually boosted economic activity. Of course, it was nonsense…

If you could really improve an economy by breaking windows…or having a tornado pass through down…why not just blow up a whole city?

The Daily Reckoning