Krugman is a partisan leftie, but on areas that don't touch on partisan politics he is supposed to be a competent economist. I'm slightly surprised to see he made a "broken windows fallacy" argument. -
"After the September 11, 2001 attacks, some economists, such as Paul Krugman, suggested that the rebuilding in New York would stimulate billions of dollars of economic activity, which would provide a net benefit to the United States economy, which was in recession at the time.[1] But others argue that this was an example of the broken window fallacy, since it ignored the billions of dollars in assets which were a net loss as a result of the attack. If the World Trade Center should be rebuilt exactly as it was before, the US would have a World Trade Center, whereas without the September 11, 2001 attack, the US would have not only the World Trade Center, but also all the resources that now must be spent on rebuilding it--not to mention the lives lost in the attack.
This also ignores the hidden costs of things that do not occur as a result of reaction to the event, such as business travel not taken because of fear of terrorism, the loss of business to suppliers of those services, their suppliers, and so on. It is quite likely that the fear of terrorism, including subsequent events such as the anthrax scares, deepened the existing recession and made things even worse for the economy as a result."
en.wikipedia.org |
