Broken-Window Fallacy
25 July 2007
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
Dear Editor:
Hans Redeker, BNP Paribas's chief currency strategist, argues that the demand to rebuild in the wake of the floods now afflicting the U.K. might give the economy an "unforeseen boost" (July 25). Rubbish.
Resources spent to rebuild are no longer available to produce goods and services that would have been produced had the floods not happened. The economy isn't boosted; it's damaged. If Mr. Redeker's economics were correct, today's boom towns would be Mogadishu and Baghdad. Were I a client of BNP Paribas, I would hope that his bosses give Mr. Redeker an unforeseen boot.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
Dear Editor:
Hans Redeker, BNP Paribas's chief currency strategist, argues that the demand to rebuild in the wake of the floods now afflicting the U.K. might give the economy an "unforeseen boost" (July 25). Rubbish.
Resources spent to rebuild are no longer available to produce goods and services that would have been produced had the floods not happened. The economy isn't boosted; it's damaged. If Mr. Redeker's economics were correct, today's boom towns would be Mogadishu and Baghdad. Were I a client of BNP Paribas, I would hope that his bosses give Mr. Redeker an unforeseen boot.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Thursday February 14, 2008 at 11:18am