Home > 1 > The Parable of the Sooty Window

The Parable of the Sooty Window

Here is another take on the Broken Window fallacy from Steven Horwitz, Professor of Economics at St. Lawrence University.


Steven Horwitz

The economic consequences of the volcanic ash cloud covering Europe have been the topic of much discussion in the last few days. The doom and gloom set has been totaling up the economic costs of disrupted travel and commerce and the media are reporting the various lengths to which people have gone to get where they need to go. I think they have missed the simple economics of it all. The ash cloud has been great for the economy. Let me swiftly explain.

Think of the stranded travelers in Europe who are now spending money on food and lodging that they would not have spent otherwise. What a boon to the hotel and restaurant industry at the airports and elsewhere! Think of the people like John Cleese who took a $5100 cab ride from Oslo to Brussels. What a glorious time for the taxicab industry! When is the last time cabbies got fares like that? Rental cars, trains, and even boats are rolling in the profits the last few days.

Now consider the layer of ash that is covering much of Iceland and northern Europe. What at first seems like a real mess is in fact a one-in-a-lifetime economic opportunity: think of all the jobs that will be created in cleaning up that ash! Given the double-digit rates of unemployment that affect much of Western Europe, the ash is something of a gift as it could conceivably create clean-up jobs for millions. Think of the new demand for brooms and vacuum cleaners and cleaning supplies that will be necessitated. Those folks will make nice profits and probably hire more workers as well. The volcano might be the best thing that ever happened to these industries.

Finally, to the extent that the ash cloud obliterates the sun and produces cooler and darker days, the electricity providers will benefit as might those who make blankets and sweaters. The economic benefits of the volcano are surely broad and deep!

So given all of this, I’m a bit confused as to why so many people think this ash cloud is so bad for the economy. It seems to me that it will cause increases in GDP in all of these areas. In fact, rather than looking for ways to prevent a recurrence, I think we should be encouraging more volcanic eruptions, earthquakes, hurricanes, urban riots, terrorist attacks, and window breakingbecause each and every one of them create all kinds of job and profit opportunities for different parts of the economy when we have to clean up from the mess they make.

Of course if you think that makes sense as good economics, you probably think a second stimulus package makes sense too. And you definitely need to read Bastiat.

Steven Horwitz is Charles A. Dana Professor of Economics at St. Lawrence University.

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