Friday, September 7, 2012

Politicians and the broken window fallacy

I regularly communicate with Tom Harris, Executive Director of the International Climate Science Coalition, an organization that promotes objectivity and the scientific method in relation to climate science.  He sent me an economics question prompted by a politician's comment. 

Here is what Senator Mitchell from Alberta said: 

“I would argue that, once we get started (on programs to stop climate change), we will find that doing it right will actually stimulate the economy in a way that we cannot even imagine, just like winning the Second World War stimulated the economy in ways we could not imagine. It created one of the strongest Western industrialized economies, which has kept us sustained in the kind of lifestyle that people around the world envy. It did not wreck our economy to win the Second World War; it fundamentally sustained and created one of the strongest economies that you could imagine in the history of the world. That is exactly what will happen if we begin to do something about climate change.”

I went to the full discussion on the Senate site. He is evidently an economic illiterate. He relies on the "broken window fallacy" that was easily proven false long ago and is discussed in Henry Hazlitt's 1946 book "Economics in One Lesson". That story is one of the baker whose front window is broken by a vandal. The glassmaker then has a job to do and must be paid for his work - according to Senator Mitchell this is a job creating strategy! But of course the baker must pay for this work out of money he would have used elsewhere, and so instead of having a window and wealth to spend, he has only a window. On balance, wealth has been destroyed because a product that added no value must be created to replace the one that had value. 

Of course, anyone with a brain does not have to think more than a second to realize that if destruction created wealth then we should destroy the world right away to improve everything. So blatant and nihilistic a philosophical and logical error is unforgivable for someone in a supposedly learned position but is unfortunately prevalent in our elected officials as they are mostly economically illiterate. Absent the destruction of thousands of lives and fantastic amounts of wealth, Canada would have had the wealth available to produce far more than we actually did. One of the effects of the war was to destroy some of our competitors, whose countries were all bombed to bits, so naturally we had an advantage in production for some time afterwards. Of course, it is sometimes necessary to wage a war in self-defence, but such a need destroys existing wealth and prevents the accumulation of more wealth.

Destroying wealth in a vain and futile attempt to stop climate change can only do harm and in no way can stimulate anyone's economy except the select few who enjoy government favors and who personally benefit from the destruction of others. The ideology of Senator Mitchell is one held by primitive societies prior to the industrial revolution, when wealth was largely static and was often accumulated by waging war against other peoples and stealing their physical assets. The enlightenment and consequent industrial revolution changed all that, however it is still held by many collectivists and primitive thinkers who ignore the lessons of the enlightenment and whose ideas have not risen above the level of tribalism. 

That such a man holds a position of prominence and political power over our lives and is paid by the producers of wealth to speak such ignorant vitriol is a testament to how low is our societal level of scientific, economic and philosophical knowledge.

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