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One of my recent columns, “Beyond Anthrax,” described the likely dire impact on the economy of currently projected levels of war-related spending unless there are immediate and commensurate spending cuts in other areas. Immediately after its publication, an e-mail arrived. “Your column has a serious omission,” the e-mail message read, in that it failed to account for the likely stimulus to the economy that is brought about by war. The e-mail raised an important issue: Does war create prosperity? An immutable economic rule governs the outcome of any government spending program, such as war-related spending. New government spending does not come from some newly created source of wealth; it can only be made possible by the redirection of money away from individuals to the government. The redirection of the use to which available money is put occurs primarily through taxation. While there may be times when the redirection does not occur immediately (e.g., if government spending is financed through deficit spending/borrowing), ultimately money is taken away from individuals who would otherwise have spent it on some things and given to the government to spend on other things. Such government spending is not financed by some new source of funds. It does not create new net wealth. Ultimately, the taxpayers pay. While it is true that some people will get richer due to government spending on the things they produce, it is unavoidable that other people will get poorer due to spending being redirected away from the things they produce. In “Economics in One Lesson,” Henry Hazlitt illustrates this economic principle through the Fallacy of the Broken Window. A hoodlum throws a brick through a baker’s window, shattering it. The window must be repaired. This makes the repairman better off, which most people see and acknowledge as a positive thing. But, less noticed — and rarely discussed — is that it also makes others worse off, namely the baker as well as those who would have sold things to the baker if he had not had to pay for repairing the window. For example, the baker had planned to buy a new suit, but he is now forced to use that money to repair the window. This makes the suit maker worse off: he will now sell one less suit. And the baker could have had both an intact window and a suit — now, he can only have one. If, indeed, the breaking of the window created prosperity, wouldn’t we all break our windows? Or to put it another way, if bombing buildings created prosperity, wouldn’t we all destroy our own houses? We do not destroy things that have real value (as opposed to things that are obsolete or have otherwise lost their value) precisely because such destruction causes a net loss, not a net gain in prosperity. The Broken Window Fallacy is one that Hazlitt characterizes as “elementary.” “Anybody, one would think, would be able to avoid it after a few moments’ thought.” Yet, incredibly, Hazlitt notes, “under a hundred disguises, [it] is the most persistent [fallacy] in the history of economics.” Clearly it is alive and well today. According to Hazlitt, the study of economics — a subject with more than enough complicating considerations at the outset — is haunted by more fallacies than any other study known to man. This he attributes to the tendency of every group to plead its own special interests, and the tendency of most people to ignore secondary consequences. In this, he says, lies the difference between good economics and bad. While these distinctions may seem obvious to many, in the field of public economics they are often ignored. The idea that destruction promotes prosperity is “solemnly reaffirmed every day by great captains of industry, by chambers of commerce, by labor union leaders, by editorial writers and newspaper columnists and radio and television commentators, by learned statisticians using the most refined techniques, by professors of economics in our best universities. In their various ways, they all dilate upon the advantages of destruction,” says Hazlitt. Certainly, some government spending in a war may produce technological discoveries or advances, which may increase productivity at a particular point in time and eventually lead to an overall net increase in prosperity. Then again, government spending may not produce any such advances, or enough of them. In any event, the focus of government spending in a war is obviously not on research — it is on fighting and defeating the adversary, and repairing and replacing what is destroyed in the process. Those who are paid for supplying their talent or goods in these efforts obviously benefit in that immediate sense. As Hazlitt cautions, such complications should not distract from the basic truth that wanton destruction of anything of real value is always a net loss. Martha A. Dean is an attorney practicing environmental law in Hartford.

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