Wednesday, August 24, 2011

On Breaking Windows

Matt Yglesias:
The fact that breaking windows would make a society poorer (fewer windows) is precisely why nobody ever proposes stimulating the economy by deliberately smashing windows. But the way the dialogue works is that first a Keynesian observes that fiscal stimulus can increase growth in a depressed economy. Second, as an attempted reductio, a conservative says “if that was true, then you could increase growth by breaking a bunch of windows.” Third, the Keynesian accurately points out that you could, in fact, increase growth by breaking windows. Fourth, the conservative accuses Keynesians of wanting to break windows or believing that window-breaking increases wealth. But nobody ever said that! The point is that we have very good reasons to think smashing windows would be a bad idea—there’s more to life than full employment—and that’s why Keynesians generally want to boost employment by having people do something useful like renovate schools or repair bridges.

As regular readers know, FLG is very fond of bringing up the window breaking analogy, but not because of stimulus. That's silly.

It's the damn green technology incentives that pay people to replace lightbulbs and, as a matter of fact, replace perfectly good windows that are a much better example.

(This is where somebody insists that the existing windows aren't perfectly good; they're inefficient. To which FLG replies, if they were so much better, then people would replace them without an incentive. If you need a rebate to make it happen, then FLG thinks people would be worse off making the switch sans rebate and it is, in fact, paying people to break windows.)


Anonymous said...

You must have been out of town when Krugman suggested a buildup for an imaginary alien invasion as a way to get out of our "slump":

Mrs. P

Galatea said...

What if benefits from lightbulb or window replacement do indeed outweigh greater cost, but over a decent span of time -- say, a year's worth of energy bills?

The example I am really thinking of here is air conditioning. A cheap window unit air conditioner cost me $100. A wall-mounted efficient Japanese beast would have cost me $1000. I didn't have $1000 when I moved in. But a year later, I'd spent more cooling the bedroom than I would have with the Mitsubishi.

Paying me to make the efficient choice would have been a way of expanding my capability to make a long-term decision. Instead, I made the short-run choice: I want to not have heat stroke now, and lose money later.

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