“And I am saying the Keynesian assumptions are not true, so it does apply, and it’s also pointless to assume they are true for purposes of arguing with them. Are you honestly saying I should assume true what I think is untrue for purposes of trying to prove it is untrue?”
No. I’m not, I’m saying the opposite and you seem to be incapable of understanding this. You are wasting your time over and over again just like many people on this thread are and I see no reason in arguing against you anymore. Please don’t waste my time and yours any further.
While the BWF does not specify time, the furthest Bastiat/Hazlitt goes is to say that people will be permanently worse off because of wasted time
And as I said, there is no expiration date on it.
I don’t know how many times I have to say this, I’m dealing in the Keynesian dreamworld, the idea that the government cannot compare interpersonal utility is not a case of the BWF, but it can be used to make a stunningly different, and more equally relevant argument.
I know it isn’t. I am specifically directing that argument to the notion that increased activity is necessarily beneficial activity (and if it is deemed beneficial, at what cost and for whose benefit?)
I’m supposing direct stimulus funded through an expansion in the effective money supply, either indirectly (government loans) or directly (direct money printing or as Keynes supports a surplus which is taken out of circulation from tax revenues beforehand). You cannot deny that this spending will increase AD and put people back to work. If this causes uncertainty then this is a different argument entirely.
It may increase spending and therefore “AD”. It can also do a lot more than that, and this is where the BWF creeps in.
In Keynesian models wages are sticky on their own with or without interventionism
Like Esuric mentioned, a certain level of “stickiness” is desirable in the economy. Contracts and “idle resources” may be employed to deal with uncertainty. The government roughshodding over these won’t improve the situation at all. I think Xahrx dealt with the whole “sticky wage” line of reasoning satisfactorily.
Most of the rest of the arguments you make are against other Keynesian assumptions and they do NOT have to do directly with the BWF.
Because I am aiming them at the notion that somehow “idle resources” renders the BWF inapplicable. They are supporting arguments in some cases, yes, but if you are arguing that a theory is inappicable due to certain conditions and I argue for separate reasons that those conditions do not obtain, then surely the arguments are relevant.
It is not shorthand, why would it be?
The fact that it encapsulates concepts over and above what Bastiat (and Hazlitt) had intended to convey by it does not mean it cannot be elaborated over time. The original parable is a lot simpler and has much greater impact, because Bastiat intended it to educate the general public as far as I know. It does not mean that the BWF cannot describe far more extensive, complicated situations.
“Because I am aiming them at the notion that somehow “idle resources” renders the BWF inapplicable. They are supporting arguments in some cases, yes, but if you are arguing that a theory is inappicable due to certain conditions and I argue for separate reasons that those conditions do not obtain, then surely the arguments are relevant.”
Yes, but this is not the BWF in its normal state. The whole point of this thread was to attack the practice of some Austrians (usually those who don’t actually know too much about the subject) of crying that it doesn’t apply because of the broken window fallacy when while if we’re dealing with a Keynesian model, the BWF does not apply. We have to criticize parts of the Keynesian model before we can say that the BWF applies as such.
“The original parable is a lot simpler and has much greater impact, because Bastiat intended it to educate the general public as far as I know.”
As Esuric said there’s no reason to believe that Bastiat knew of or intended the BWF to criticize anything involved with Keynesian economics because he predates the school and many of the arguments used by Keynes.
How it was originally intended to be used is irrelevant to whether it can characterise a broader range of scenarios than were originally envisaged. Now, on the matter of the assumptions of the Keynesian model, I’d agree that you need to dislodge some of them before discussing the BWF, but that isn’t because the BWF is inapplicable due to idle resources per se, but rather idle resources along with a host of assumptions about the govt’s efficacy in redirecting resources to other uses AND the assumption that it can do so in what is essentially a vacuum (or in a way that has no effect on the rest of the economy, which as Xahrx has shown is ridiculous.)
Probably the easiest condition to dismiss is the notion that utilities are interpersonally comparable/measurable, and without this assumption alone the BWF becomes operative.
If you’ll note in my post, I already said I wasn’t going to bother. That you would throw this in strikes me as extremely trollish, which probably was your intent all along. If not, you may want to consider the fact that just because you’re not getting the answers you want doesn’t mean the people giving them to you are at fault, your question may be poorly articulated, or just plain dumb.
You should just give up, he’s asking an unanswerable question which basically boils down to: “Assume this is right and then prove it wrong.” The BWF may not apply to the Keynesian model, but if the model is wrong, who gives a pile of cow twinkies? In the dipstick model of physics entropy doesn’t apply, so prove or disprove thermodynamics some other way…
Or maybe it means that someone needs to bother reading the OP or understanding exactly what their opponent was saying before jumping in an argument:
“I AM NOT ARGUING IN FAVOR OF KEYNESIANISM, I AM MERELY STATING THAT THE BROKEN WINDOW FALLACY BY ITSELF AND UNAIDED BY OTHER ARGUMENTS DOES NOT ADDRESS KEYNESIANISM”
"The BWF may not apply to the Keynesian model, but if the model is wrong, who gives a pile of cow twinkies? "
Everyone! That is where the argument is! If you’re trying to critique theory X, but you invoke argument Z, which isn’t effective with theory X because according to the assumptions of the theory Z cannot happen, then you’re wasting your time. You have to argue specifically with the flaws of theory X that make argument Z applicable and possible in reality. I still have no clue if you understand the purpose of this entire thread which was to encourage an increase in effective Austrian argumentation, something which it has utterly failed to do because people are talking straight past what I’m trying to show. You finally hit on it above, but you do not seem to recognize the significance.
Jon,
“Now, on the matter of the assumptions of the Keynesian model, I’d agree that you need to dislodge some of them before discussing the BWF, but that isn’t because the BWF is inapplicable due to idle resources per se, but rather idle resources along with a host of assumptions about the govt’s efficacy in redirecting resources to other uses AND the assumption that it can do so in what is essentially a vacuum (or in a way that has no effect on the rest of the economy, which as Xahrx has shown is ridiculous.)”
Then we agree.
As for whether or not interpersonal utility comparison by itself proves that the BWF applies is to me a weak argument because the fact is that with the notion of interpersonal utility we can only prove that if everyone would prefer state of affairs A over state of affairs B, that state of affairs A must be better from the outlook of all of society. With this said though the problem is that we can’t even guarantee that the existence of capitalism maximizes utility compared to other alternatives.
I am not sure how you arrive at that conclusion. If interpersonal utility comparisons are not possible, you cannot really say, as a third party, that you have benefited anyone in excess of those whom you harmed to bestow the benefit on the former individual/group. Introducing interpersonal utility comparisons and assuming that the benefit is greater is how the BWF is imagined away.
It’s true that you cannot prove that capitalism measurably maximises utility via interpersonal utility comparisons either. However, in its case the presumption is that individuals undertake actions that they assume, ex ante, will benefit them and that they are the best judges of such benefit, in choosing between competing courses for utilising their resources (with the consequence of repeated bad judgements stripping one of resources, thereby incentivising them to be more prudent.) So here we have individuals deciding for themselves how they want to utilise their resources. What the central planner (as a third party) would need to show is that they can improve on this outcome arrived at via voluntary interactions, through the interventions they propose. In the absence of interpersonal utility comparisons, they cannot do so. So it isn’t a weak argument, it pretty much strips the central planner of a crucial tool in establishing the rationale for the intervention.
One of the themes of the Broken Window parable, is that the ‘one lesson of ecomics’ (sic), is that attention must be paid to the unseen as well as the seen. I.e that what may appear ‘idle’ may yet play a role in an entrepreneurs future plans… that what may appear to be ‘putting idle resources to work through government spending’ may be diverting scarce resources into fruitless schemes…
Interestingly enough, there are writings on the uneconomic keynesian conception of idleness dating back to at least 1939…
The Theory of Idle Resources (1939)
William H. Hutt
Blurb excerpt
<<Hutt goes for the heart of Keynes’s prescription for recovery, which was to get idle resources moving, whether that is money, capital, or labor. If something isn’t being employed right now, it is being wasted.
Hutt responded at length that there is nothing uneconomic or necessarily inefficient about an idle resource. It is the decision of the owner to hold back when faced with a long-term plan, a judgment call concerning risk, a high reservation wage, or a demand for larger cash balances.>>
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:
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.
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.
Really, putting so called ‘idle’ concrete to use in government commissioned bridges is necessarily always preferreble? to leaving the concrete and concomittant resources available to entrepreneurs?
Ok, maybe it takes a more sophisticated mind to realise that we built a bridge (and we are the government) doesnt necessarily deserve a round of applause, but wait for it… the parable of the broken window has trained the economist to think about… the UNSEEN. and what is unseen when somewhat utile (though possibly not / bridge to knowheres…) bridges are seen, and squandared resources taken out of the private sphere are unseen.
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.
No, its honest, the point of the BWF is that a window, is not what has been lost to society once the full scenario has played out. what has been lost is the suit. If you are fixating on the window that is repaired, then you seem to be missing the message to economists, that it is the recognition of the (commonly UNSEEN) loss of the suit that marks out an economist, from the man-in-the-street.
The suit is only preferable to the new window if the old window isn’t broken.
Yeah, except the shop owner is without a window and without a suit. They have suffered a loss of wealth.
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.]
And who, pray tell, is the “government”? A bunch of individuals acting as soi-disant “representatives” of other third parties. How is the government evaluating the business case for this new bridge? What experience does it have that shows it is good at managing resources without stealing them? I can answer this: next to fuck all.
However, in the case of this stimulus, it’s precisely the reverse. Almost everyone would consider the bridge preferable to the raw concrete.
Who is “everyone”?
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.
The stimulus spending is in reaction to the bust, which is the destruction of wealth in question - and this is real destruction due to malinvestment of resources. Depending on how the government finances the stimulus it will either steal the funds, borrow and enslave future generations to pay for the borrowing (as well as crowd out investors in the meanwhile) or issue currency via credit expansion, reigniting the boom if successful, further prolonging damaging malinvestments that have been put on life support from the previous boom, tying up more wealth in fruitless, illusory undertakings.
So no, it isn’t “dishonest” given that the government is coercively obtaining the resources or financing their acquisition via other, potentially worse methods. Like Esuric mentioned, there is a reason resources remain idle.
nirgrahamUK: Really, putting so called ‘idle’ concrete to use in government commissioned bridges is necessarily always preferreble? to leaving the concrete and concomittant resources available to entrepreneurs?
But I don’t think the issue is that the government is using up all of the concrete. There’s still plenty of concrete left to build the beauty salon. The problem is that the labor is now engaged in building the bridge, and the capitalist will now need to pay them more to build the salon. Thus, it is not the concrete itself that is affected. Destroying a window, on the other hand, is undoing the work of past labor.
No, its honest, the point of the BWF is that a window, is not what has been lost to society once the full scenario has played out. what has been lost is the suit. If you are fixating on the window that is repaired, then you seem to be missing the message to economists, that it is the recognition of the (commonly UNSEEN) loss of the suit that marks out an economist, from the man-in-the-street.
Exactly, the point of the broken window anaology is not the broken window. That’s why its dishonest. If you think it really is the same thing as the constructed bridge scenario, then I propose that we change to that example. Every time the government resorts to stimulus, I want to hear Austrians say, “this is the constructed bridge fallacy!”–and then explain things in those terms.
And who, pray tell, is the “government”? A bunch of individuals acting as soi-disant “representatives” of other third parties. How is the government evaluating the business case for this new bridge? What experience does it have that shows it is good at managing resources without stealing them? I can answer this: next to fuck all.
What does this have to do with my point? I am not concluding that the bridge is better than the salon. I am simply pointing out that the scenario doesn’t contain the same features as the broken window example. There’s certainly still room to contest the decision.
The stimulus spending is in reaction to the bust, which is the destruction of wealth in question - and this is real destruction due to malinvestment of resources. Depending on how the government finances the stimulus it will either steal the funds, borrow and enslave future generations to pay for the borrowing (as well as crowd out investors in the meanwhile) or issue currency via credit expansion, reigniting the boom if successful, further prolonging damaging malinvestments that have been put on life support from the previous boom, tying up more wealth in fruitless, illusory undertakings.
So no, it isn’t “dishonest” given that the government is coercively obtaining the resources or financing their acquisition via other, potentially worse methods. Like Esuric mentioned, there is a reason resources remain idle.
I am not contesting whether the government is doing anything wrong (I am leaving that question open). I am pointing out that the example is an incorrect analogy. These “destructive malinvestments” consist of things like turning raw wood into houses–not in breaking things that people didn’t want to replace. These houses are malinvestments because they lie idle while a record number of people go homeless. These homeless people can’t buy the houses because they don’t have enough money. We can argue whether that’s fair or not–and this is really the area of contention. But you have to acknowledge that there is a nonmonetary desire for the houses whereas there is no desire presumed for the broken glass.
You should listen to Neodoxy. He’s only trying to put you in a better position to argue your case.
The boom is a case of wealth ascendance of an illusory nature, only for it to come crashing down with the bust. You are correct that this is not a case of destruction being paraded as beneficial (even though it is, but this isn’t usually advanced in its favour.) It is, however, a case of the seen “benefits” vs the unseen costs. There isn’t even necessarily a non-monetary desire for the houses or other objects of the boom (bear in mind many house purchases were speculative; they thus failed as investment goods, not as consumer goods.) The loss is both on the scale of genuinely profitable, sound investments being starved of funds and of unsound ones absorbing funds up until they no longer exist.
The stimulus (and bailouts) in reaction to the bust, and its financing, is the breaking of the window. Particularly since it is a favourite of interventionists to point to and blather on about “creating jobs”, reducing unemployment below where it otherwise would’ve been (fancy that - unfortunately that’s only if you ignore those discouraged from seeking employment) Neodoxy is trying to make a point that if you assume a series of rather lofty Keynesian assumptions regarding the economy hold true, then the BWF does not apply (and like Xahrx pointed out these assumptions are so ludicrous as to beggar belief.)
You’ve argued that it doesn’t apply during a recession. I and others have argued it does, unless you grant certain very specific Keynesian assumptions. So what is the issue?