Wednesday, February 27, 2008

"War is good for the economy!"

No, it isn't, stupid! This idea has been thoroughly debunked.

Not recently, mind you. But if you were an American you could have gone down to the market to buy some eggs, milk, and human beings and then gone home and read an essay called, "Parable of the broken window" written by Frédéric Bastiat in 1850 that completely trashes the notion.

Quoth Wikipedia (emphasis added):
Some claim that war is a benefactor, since historically it often has focused the use of resources and triggered advances in technology and other areas. The increased production and employment associated with war often leads people to claim that "war is good for the economy." Others claim that this is an example of the broken window fallacy. The money spent on the war effort, for example, is money that can't be spent on food, clothing, health care, consumer electronics or other areas. The stimulus felt in one sector of the economy comes at a direct—but hidden—cost to other sectors.

More importantly, however, war literally destroys property, buildings, and lives. The economic stimulus to the defense sector is offset not only by immediate opportunity costs, but also by the costs of the damage and devastation of war. This then becomes the basis of a second application of the broken window fallacy: it is claimed that the rebuilding that follows war and its destruction provides a further stimulus to the economy, this time mainly in the construction sector. However, immense resources are spent merely to restore things to the condition they already were before the war began. After the war, the nation has a rebuilt city; before the war, it had a city and time in which its labour could have been used for more fruitful purposes. Further, the fixed amount of natural resources could have been used to build a second city rather than to rebuild a destroyed city, hence highlighting the occurrence of waste. An example of this in America is that many highway and bridge projects that were planned in the late '30s had to be put off until after the end of the Second World War, and the pent-up demand for not only roads, but houses, cars, and even radios led to massive inflation in the late '40s. The war also delayed the commercial introduction of television, among other things, and the resources sent overseas to rebuild the rest of the world after the war were not available to directly benefit the American people.
In other words, wars always make a nation worse off. If you see the "economic benefit" to one party, it's only coming at the expense of someone else you aren't seeing. That's a zero-sum gain. Zero-sum gains aren't an overall benefit in economics or anything else.

It also ignores all those bullets, bombs, etc being used to destroy people's property (and murder them), which makes the total wealth that exists in a country less. That's a net loss.

So, if, for example, some country like the United States spent 1 trillion dollars to attack another country like, I don't know let's say Iraq, it would be harmful to the United States and even more harmful to Iraq. That Haliburton or Lockheed-Martin would benefit at the expense of everyone else doesn't make it a wonderful boon to the economy.

On the Scott Horton Show today he had Lew Rockwell on as a guest by phone. They discussed the broken window fallacy and mentioned that there was another example of how utterly stupid the "war is good for the economy" idea is. If war is so great for the economy, then why not have the US and Japan make a huge fleet of ships, sail them out to the middle of the Pacific Ocean, take all the sailors off them, and then blow them up using some expensive to make (and therefore also "good for the economy") nuclear weapons sinking them to the bottom? Do it several times a year, and the economy will just be roaring.

Hell, evacuate a city of its inhabitants, nuke the place, and rebuild it. Think of all the economic benefit! Makes perfect sense!

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