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[BoringSupreez]

window.jpg (313.68 KiB) Viewed 584 times

[prfsnl_gmr]

Strangely enough, that actually works, and it explains why World War II ended the Great Depression. (The Capitol Hill Babysitting Co-Op explains, in laymen's terms, how recessions work and how Keynesian economics can resolve them.)

[Luke]

Strangely enough, that actually works, and it explains why World War II ended the Great Depression. (The Capitol Hill Babysitting Co-Op explains, in laymen's terms, how recessions work and how Keynesian economics can resolve them.)

Point^

But, Counterpoints:

http://economics.about.com/od/output-in ... allacy.htm

http://www.investopedia.com/ask/answers ... allacy.asp

[prfsnl_gmr]

Point^

But, Counterpoints:

http://economics.about.com/od/output-in ... allacy.htm

http://www.investopedia.com/ask/answers ... allacy.asp

Undoubtedly, wars, natural disasters, broken windows, etc. are not beneficial to an society. (They lowers living standards, divert resources, etc.) They do, however, increase demand in the short term, which I think is the point BoringSupreez's cartoon placed in dispute. (Perhaps it was just stating that things which increase economic production are not necessarily the best things for society. I would agree with that point.)

I do not, however, think that Bastiat's "broken window fallacy" is an indictment of Keynesian economics. (If so, it is poorly conceived.) At a basic level, recessions are caused by people not spending enough money. (That is, goods and money do not "go away" during a recession; they simply stop circulating.) The "broken window fallacy" assumes that the person with the broken window would have spent his money on something else. In a recession, however, the person with the broken window would be saving his money and keeping it out of circulation. The broken window, however, "forces" the person to spend his money and thereby alleviates the effects of the recession.

Moroever, societies already have a lot of "broken windows" (such as roads, bridges, information infrastructure, etc.) that still need to be "repaired" when they falls into recession. Using the "broken window fallacy" to argue that a society should not "repair" these "broken windows" during a recession reflects a deep misunderstanding of both Keynesian economics and the "broken window fallacy" itself.

[Luke]

Economics is theory.

[prfsnl_gmr]

So is gravity.

[Luke]

Gravity is a theory with proven and recorded mathematical laws.

Economics is "this could happen".

[prfsnl_gmr]

There are laws that describe how gravity works, but theories of gravitation are just that.

Similarly, there are laws that determine how prices are set in a free market, but price theory - like theories of gravitation - is just a theory. (It also has just as much basis in mathematics and observation as any theory of gravitation.)

In any event, calling the field of economics a "theory" makes about as much sense as calling biology or physics a "law". While economics may not be a physical science, it is nonetheless a science like biology or physics.

[Ack]

I think now is an excellent time to move into legal theory.

[prfsnl_gmr]

I think now is an excellent time to move into legal theory.

Law is about as far away as you get can get from a science.