Storms as economic policy

“Hurricane Sandy is swirling towards the US, forcing presidential candidates to adjust schedules and cancel events.”

If only governments could control storms, they would surely adopt them as an economic policy. Just imagine, all those broken windows. What a boost to the economy all that “extra” work for glazers would bring. Americans, do not board up your windows and surpress economic stimulation, let mother nature bestow her blessing upon you!

I am, of course, being facetious and this is what’s known in economics as the ‘broken window fallacy’ a thorough explanation of which can be found at I’m reminded of a fine example of this fallacious reasoning which occurs in the film The Fifth Element.

I’m further reminded of an anecdote about John Maynard Keynes, whose ideas have profoundly affected the theory and practice of modern macroeconomics, and informed the economic policies of governments, which I came across on the Adam Smith Institute blog.

“Drama was a Keynes tool. During a 1934 dinner in the U.S., after one economist carefully removed a towel from a stack to dry his hands, Mr. Keynes swept the whole pile of towels on the floor and crumpled them up, explaining that his way of using towels did more to stimulate employment among restaurant workers.”

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