tag:blogger.com,1999:blog-759178030677978044.post2031902502858014266..comments2024-02-19T07:24:42.397-08:00Comments on Anglican Curmudgeon: The Broken Window FallacyA. S. Haleyhttp://www.blogger.com/profile/05108498446058643166noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-759178030677978044.post-73047011087056755222010-09-30T04:38:43.640-07:002010-09-30T04:38:43.640-07:00Those with savings are moving to gold, silver, and...Those with savings are moving to gold, silver, and oil to preserve their wealth until the market has cleared all the malinvestments from the economy and capital accumulation can begin afresh. The central bank -- the Federal Reserve -- is the chief culprit in the ruination of the economy: by forcing interest rates below market levels in order to "stimulate" the economy, investors are lured into pursuing projects that will prove unsustainable once the shortage of real loanable funds is realized. Projects go bust -- most glaringly, commercial real estate projects and subdivision development that must cease due to limited resources and shrinking demand [low rates cause consumers to stop saving and engage in "postive leveraging" to the point where that can no longer borrow and spend].<br /><br />So, those with gold, silver, and other valuable commodities will wait until the market has done its work of clearing the mistakes. But of course, the government, with its stimulus plans, and the Fed, with its monetary easing, are working overtime to stave off downward market pressures for the benefit of their clients -- which only prolongs the suffering and takes us to the precipice of default or (hyper?)inflation.<br /><br />Regarding broken windows du jour,<br />http://www.thefreemanonline.org/columns/not-so-fast/will-clean-energy-lead-an-economic-recovery/Chuck Hickshttps://www.blogger.com/profile/01929470338280066656noreply@blogger.comtag:blogger.com,1999:blog-759178030677978044.post-30992479704428533482010-09-29T21:24:45.264-07:002010-09-29T21:24:45.264-07:00In my view, all of these fallacies are simply cons...In my view, all of these fallacies are simply consequences of a single major underlying one: That the economy grows when people spend more money.<br /><br />This line has been parroted so often it's taken as a truism, but when recast slightly, it becomes a bit clearer: "The economy grows when people consume at a faster rate."<br /><br />In fact, these are the <i>results</i> of a growing economy, which is caused not by people's wanting more--people always want more--but by increased <i>production of wealth</i>.<br /><br />Problems such as the broken-window fallacy tend to resolve themselves rather quickly when viewed with this blatant fact in mind--of course the community isn't better off, because the net production of valuable goods is brought from some positive value (plus one pair of shoes) to neutral (plus one window minus one window), and the same rationale is applicable to large-scale economic questions as well.chrylishttps://www.blogger.com/profile/08417282205206760286noreply@blogger.comtag:blogger.com,1999:blog-759178030677978044.post-69019686629387692912010-09-29T19:42:01.689-07:002010-09-29T19:42:01.689-07:00Exactly right, Pewster. I agree with C. Wingate th...Exactly right, Pewster. I agree with C. Wingate that slinging labels around does nothing to advance the situation; what needs to happen is that those with the power of the purse need to stop, regardless of whose long-dead name they say they are doing it in, trying to "create jobs" by using taxes and borrowed money.<br /><br />Perpetua correctly identifies a different problem -- namely, that those who have any money at all to spend find themselves in too uncertain a situation to foresee a good result, and so they just hold off on spending until the fog of uncertainty clears away a bit. Government indecision and paralysis are adding to the fog, not helping to clear it away. <br /><br />Even slaves figured out how to survive in the early days of the Roman Empire. But when the barbarians were at the gates and all bets were off, then it was every man/woman for himself/herself.A. S. Haleyhttps://www.blogger.com/profile/05108498446058643166noreply@blogger.comtag:blogger.com,1999:blog-759178030677978044.post-50838080381717599112010-09-29T19:24:57.966-07:002010-09-29T19:24:57.966-07:00IMHO, the government is currently doing everything...IMHO, the government is currently doing everything it can to break my windows in hopes of stimulating the economy. It won't work, but that is what the "powers that be believe." <br /><br />I know I have that glazier's card around here somewhere...Undergroundpewsterhttps://www.blogger.com/profile/10182191422663119484noreply@blogger.comtag:blogger.com,1999:blog-759178030677978044.post-28086652127700293782010-09-29T17:36:24.981-07:002010-09-29T17:36:24.981-07:00Maybe the Baker was going to use the money to buy ...Maybe the Baker was going to use the money to buy a suit or maybe the Baker had the money in the bank earning interest. And so the bank had the money loaned out to a man who was using it to open a small business. If the Baker has to withdraw his money from the bank to replace the window, the bank has less assets to loan out to people who are starting small businesses. <br /><br />So the problem with the "Broken Window Fallacy" as told here is that it doesn't discuss the issue of the value of savings.<br /><br />It would be a different story if the Baker was "hoarding money", keeping gold stored in his closet or under a mattress. Then he wasn't planning to spend the money on a new suit or lending it to others. So, in that case there would be a stimulation of the economy from the broken window.<br /><br />I want to spend another minute exploring the importance of how savings are invested -- in the real world, people rarely hoard money in unproductive investments. However, government policies have driven interest rates so low and concerns for the value of the dollar so high that people are storing their assets in unproductive investments like gold. Wisely so for the individuals, but it is like storing money under a mattress for all the good it does the economy because the money is not being loaned out to businesses to invest in expansions, etc. <br /><br />Right now we have a lot of people holding onto their money; they aren't going to buy new suits and maybe not even repair broken windows. The government policies (and lack of same, e.g. unresolved tax rates) have paralyzed the economy.Perpetuahttps://www.blogger.com/profile/16632860530530786486noreply@blogger.comtag:blogger.com,1999:blog-759178030677978044.post-24358365576370753032010-09-29T16:08:56.064-07:002010-09-29T16:08:56.064-07:00If one goes out looking for analyses of whether FD...If one goes out looking for analyses of whether FDR's passel of programs helped or did not help in the 1930s, you can find almost any answer you want to find, and most of those answers seem to me to be predetermined by the economic dogma to which the speaker subscribes. The most pessimistic view would be that <b>nothing</b> helped short of going to war, which isn't really what any Austrian or Chicagoan wants to hear either.<br /><br />As I've said to others, identifying Obama's economic notions as socialist or Marxist is simply cant. Obama's policies are perfectly standard Keynesian stuff, and Keynes's answer to the broken window "fallacy" is contained in his famous statement about the efficacy of burying jars of money to be dug up by eager entrepreneurs. My personal belief is that all economic theory is made outdated by the persistent effort to get past its "rules", and that since people act on the theories to which they hold, you cannot treat those theories as if they were like physical laws.<br /><br />What Washington undoubtedly thought about returning veterans was that for those who were healthy, their farms were waiting for them; and for those who were not, the government owed them a pension. (It's remarkable how often military pensions show up in the history of civil unrest.) The notion that the miller and weaver and seamstress were going to have a huge army laboring for them hadn't really sunk in yet, even though the social transformation was even then well underway.C. Wingatehttps://www.blogger.com/profile/13335513246185768918noreply@blogger.comtag:blogger.com,1999:blog-759178030677978044.post-40422148773243497362010-09-29T14:22:39.310-07:002010-09-29T14:22:39.310-07:00Mr. Haley,
I honestly believe that almost every g...Mr. Haley,<br /><br />I honestly believe that <b><i>almost every generation</i></b> contains too many who will not learn and too few who are both willing and able to learn, at least insofar as one is consdering matters economic. In the past few days I have been reading Fr. Richard John Neuhaus 1991 book <i>Doing Well and Doing Good: The Challenge to the Christian Capitalist</i>. The book was primarily engendered by JPII's 1991 encyclical <i>Centesimus Annus</i>. In it, Neuhaus discusses <i>socialism</i> and writes as follows:<br /><br />"...socialism, especially in its Marxist forms, continues to have a powerful appeal…. The appeal will no doubt outlive the supposed collapse of socialist theory and practice in recent years. Anthony Daniels, a distinguished student of Marxism, explains why this should be the case.<br /><br />"'<i>Why should the philosophy of a man who died a century ago, whose prophecies have been confounded, and whose follwers have caused some of the greatest catastrophes in history, remain the single most important intellectual influence in the world today, more important by far than that of men of more profound insight? Marxism answers several needs. I has its arcana, which persuade believers that they have penetrated to secrets veiled from others, who are possessed of false consciousness. It appeals to the strongest of all political passions, hatred, and justifies it. It provides a highly intellectualized rationalization of a discreditable but almost universal and ineradicable emotion: envy. It forever puts the blame elsewhere, making self-examination unnecessary and self-knowledge impossible. It explains everything. Finally, it persuades believers that they have a special destiny in the world. For disgruntled intellectuals, nothing could be more gratifying. The end of Marxism is definitely not nigh</i>.'"*<br /><br />I suspect that mankind's own concupiscence, the gratuitous inheritance from original sin, is not likely to be overcome this side of the return of Christ, Hazlitt, von Mises, Hayek and the Friedmans notwithstanding.<br /><br />Pax et bonum,<br />Keith Töpfer<br />______________________<br /><br />*—The quotation from Daniels is from his article "He's Not Deat, Yet," <i>The Spectator</i>, May 11, 1991.Martial Artisthttps://www.blogger.com/profile/11679584221923893460noreply@blogger.com