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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: TobagoJack who wrote (15060)2/15/2002 12:25:17 PM
From: Don Lloyd  Read Replies (2) of 74559
 
Jay -

...I think the US economy will get a boost from the airport renovation money that is necessary. ...

This has the taste of the broken window fallacy.

mises.org

"...Krugman is committing the broken-window fallacy on a massive scale. Since the World Trade Towers were small as a percent of our economy, and their destruction will lead to a small amount of increased business investment, and this is good for our economy, all we need to do to really improve our economy is encourage lots of business investment by this method.

So, knock down the Empire State Building and we can further increase our economic output. Of course Krugman would not want just New York City’s economy to grow, so we should also knock down the Sears Tower in Chicago and the Hancock Building in Boston. If this does not revive the economy, we better start leveling entire cities; surely that will bring economic prosperity.

Krugman sees only the business investment that takes place when these buildings are rebuilt. He fails to see that the resources that are used to rebuild could be used to do other things if the World Trade Towers had not been attacked. We can never become richer by destroying resources and then replacing them. After the attack, the US economy is worse off in real terms, by two office buildings, about 12 million square feet of office space and thousands of productive people. ..."

Regards, Don
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