I think Neodoxy is making some of the same points I was trying to make in the Permanent Keynesian Refutation Thread. In light of my recent critique of Mises, I would reframe those points slightly. When looking at Bastiat’s parable, there are actually two things being considered:
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The intertemporal change, which we might call the transformation cost. This is the change of the intact window into broken shards of glass. Before, the window is intact; later, it is broken.
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The intratemporal change, which we might call the opportunity cost. This is the change that involves resources (ultimately labor) that are shifted from making the suit to making the new window. There is no before or later at play here. We’re considering the use of labor over the same period of time.
Thus, there are two evaluations being made. Is the intact window preferable to the broken glass? And: is the new window preferable to the suit? In the case of Bastiat’s example, the two things are intimately connected. The suit is only preferable to the new window if the old window isn’t broken. However, the actual examples of stimulus don’t generally contain this connection. For example, suppose the government takes money (or prints it and diverts the resources indirectly) from a capitalist who plans to (eventually) construct a beauty salon. The government then spends the money on constructing a bridge. Thus, we can see how the labor that was going to go into the construction of the salon instead go into the bridge. This is the opportunity cost present in the BWF. [aside: There’s nothing in the info given here to determine which opportunity cost is higher for “society.” We just know that the capitalist prefers one and the government the other.]
Now, what about the transformation cost? In this case, the transformation cost consists in changing the raw materials needed for concrete that are present in nature into a bridge. In the case of Bastiat’s example, almost everyone would consider the intact window preferable to broken glass. However, in the case of this stimulus, it’s precisely the reverse. Almost everyone would consider the bridge preferable to the raw concrete.
Thus, using the BWF against stimulus spending is a dishonest tactic. The negative trait that is being invoked when people bring up “broken windows” and “nuked cities” is not present in government stimulus. Such spending doesn’t destroy existing wealth. The real question is whether it creates more wealth than would be created without it.