As the title suggests, it’s a list of economic fallacies that kept cropping up between 1774 and 2004 and, unfortunately, they’re still happening today. The fallacies include:
Myth #1: The Broken Window
One of the most persistent is that of the broken window—one breaks and this is celebrated as a boon to the economy: the window manufacturer gets an order; the hardware store sells a window; a carpenter is hired to install it; money circulates; jobs are created; the GDP goes up. In truth, of course, the economy is no better off at all.
True, there is a sudden burst of activity, and some persons have surely gained, but only at the expense of the proprietor whose window was broken, or his insurance company; and if the latter, the other policyholders who will pay higher premiums to pay for paid-out claims, especially if many have been broken.
Myth #2: The Beneficence of War
A second fallacy is the idea of war as an engine of prosperity. Students are taught that World War II ended the Depression; many Americans seem to believe that tax revenues spent on defense contractors (creating jobs) are no loss to the productive economy; and our political leaders continue to believe that expanded government spending is an effective way of bringing an end to a recession and reviving the economy.
The truth is that war, and the preparation for it, is economically wasteful and destructive. Apart from the spoils gained by winning (if it is won) war and defense spending squander labor, resources, and wealth, leaving the country poorer in the end than if these things had been devoted to peaceful endeavors.
Myth #1 is poignant because I remember during the Black Lives Matter protests last year, people were condemning the destruction of windows. I wonder if there’s another link with Myth #2.
Anyway, those are excerpts from the first two. Go read the rest.