Broken Window Fallacy

Here are three kinds of income:

1. Someone is paid to do something useful

This is ordinary, productive work.

2. Someone is paid unconditionally

This is wealth redistribution

3.  Someone is paid to do something useless

This is like wealth redistribution in that the payer recieves nothing significant in return. However the reciever is required to destroy his income by wasting the time-equivalent of it.    In that manner, it is always worse than #2.   #3 is the cousin of the broken window fallacy.   The BWF argues that breaking a window is a net gain for the economy via employing all the people involved in fixing it, and secondarily all the people with whom those artisans spend their income.    In reality, the broken window is a net loss, because the money spent to repair it would have been spent in some other way.     All labour and capital will be used in some way (in the broadest sense) no matter what, and the trick is ensuring that it is used productively.   In the long run, the effect of any stimulus package will be measured in terms of the amount of productive work it accomplishes, and how efficiently it accomplishes this, not how many questionably-necessary jobs it creates.

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