The Fallacy of the Broken Window

Students of economics have been debunking the fallacy that breaking a window causes economic “growth” for many decades.  And yet, it lingers and ofen dominates political discussions.

Wired blogged about California’s unprecedented new attack on businesses and individuals, with its cap and trade system and other measures designed to forcible suppress energy consumption in the state.  California is breaking a lot of windows, and claims this will promote growth.

John Doerr, the green VC, said before the bill passed that it would spark entrepreneurs to “go out and compete and innovate to bring enormous solutions to the market.”

Uh, Mr. Doerr?  There is a big difference between looting and creating wealth.  I have no doubt that your firm stands to cash in on this new eco-religion sweeping the state and the nation.  But let’s be honest where the money will come from.  These “solutions” will be solutions to problems caused by government.  Entrepeneurs will be going out there and competing to fix broken window.

California seems more and more finished to me.


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