THE IMPORTANCE OF ADVERSITY, AND BROKEN WINDOWS

One of the worst books I’ve ever read is Greg Stielstra’s ‘Pyromarketing.’ The main idea behind the book is that successful marketing has its similarities to firemaking. For example, gathering wood for burning can be paralleled to finding your target market; and so on. 

The idea itself isn’t so bad, but to stretch this metaphor for 200+ pages was quite a stretch. It got to the point that, for the sake of adding filler, Stielstra inserts a Jack London story excerpt, just because the story had someone making a fire! It is truly a sad and funny book. You should read it for laughs.

Worth reading for being so horrible.
Click here.

But the reason I even bring up the book is because it contained an anecdote about the Great Chicago Fire of 1871. In many people’s view, the rebuilding that took place as a result actually reinvigorated the city, and contributed to making it the great city that it supposedly became.

THE BROKEN WINDOW FALLACY

This smacks of the broken window fallacy as told by Frédéric Bastiat. Like the Chicago fire, we’re made to believe that the breaking of someone’s window is good for the economy, because then a window repairman is given business, and his income is then spent for other goods and services; a ‘multiplier effect’ thus occurs!

What we don’t see is the wealth that would have remained with the window owner had no breaking taken place. He would have used his money elsewhere, also ‘stimulating’ the economy in his fashion, wherein even the window repairman is a beneficiary, to the degree that overall wealth is retained.

And beyond Bastiat’s parable, we learn from the likes of Ludwig von Mises and Friedrich Hayek that more accumulated capital makes for greater employment and more efficient production processes. By mistakenly focusing on accelerating consumption, one neglects the efficient/roundabout methods made possible by greater saving (and less window breaking).

OVERCOMING ADVERSITY

But then, isn’t it still possible that the people of Chicago, complacent in their unremarkable lives, needed a jolt as provided by the Great Fire?

And can we really say that adversity never brings out the best in us, does not build character? Look at body builders. Isn’t it integral to face resistance in the achieving of personal records?

Thank you, Bill Watterson’s dad, for inspiring this great strip.

Life is full of examples of people making the best of their misfortunes, of becoming even better people than they would have been sans adversity and tragedy. Does this not give some credence to the broken window after all?

DOES THIS MAKE FOR POLICY?

The real question isn’t so much whether destruction makes for prosperity or not. We live in a chaotic world where events and variables are not so easily traceable or formulable. What is ‘good’ or ‘bad’ in our lives is very much based on our perspective or position at the time. There’s the Zen story of someone breaking his leg (bad) but is thus excused from having to go die in war (good).

“Krstic, stay in the game till the end of the third.”

What we should really ask ourselves is, can policy be made at all based on deliberate destruction? We already face enough adversity and resistance in life without self-sabotage.

If the Chicago Fire had been started deliberately in order to ‘renew’ the city, this itself would have been indicative of the twisted minds of its people and politicians, minds which are not conducive to rebuilding a community.

Or imagine the Boston Celtics, who often win after trailing their opponents in earlier quarters. What if Doc Rivers tells his players to deliberately score less points until the fourth quarter, so as to bring about the right motivation they need for victory? Do you think this would improve the Celtics’ win-loss record?

While much good can come even out of the bad, a policy rooted in this hope is bound to bring about even greater bad on top of the initial bad.

FINAL REMARKS

Economics is a science of humility, in which one must concede the limitations of one’s ability to trace cause and effect. While opposite outcomes may occur even against the best diagnoses, this is no reason to abandon one’s theoretical tools in favor of more fashionable ideas that supposedly take anomalies into account. That is, unless such a ‘new science’ is likewise rooted in logic and sense.