International Investing

The LA fires are all over the news and so is the Broken Windows Fallacy; the idea that the rebuilding effects will  make the area richer than it was before the fire. It’s not just the journalists that believe destruction has a net benefit. Larry Kudlow, the former chief economist of BearStearns made the same mistake after 9/11 when he declared . In any case, the fallacy was debunked in 1850 with Bastiats, “That Which is Seen, and That Which is Not Seen, ” which can be viewed along with the rest of the Bastiat collection here.

Whence we arrive at this unexpected conclusion: “Society loses the value of things which are uselessly destroyed;” and we must assent to a maxim which will make the hair of protectionists stand on end—To break, to spoil, to waste, is not to encourage national labor; or, more briefly, “destruction is not profit.”