I visited Dartmouth College in New Hampshire recently to give a talk about The Welfare State We're In. I was told by the professor of economics who invited me that he had told his students that my book illustrated one of the theories of Bastiat. I was painfully aware that my education had not actually included Frederic Bastiat. So I thought I had better quickly gather up an idea of what he said. Naturally I googled him and found the Wikipedia entry. This led me onto a Wikipedia entry specifically on his 'parable of the broken window'. I don't think this one relates to my book but it is a superb bit of argument. This section of the entry reproduces Bastiat's own words:

Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—"It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"

Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.

Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.

But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."

It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.

The Wikipedia entry continues:

Fallacy of the argument

The fallacy of the onlookers' argument is that they considered only the benefits of purchasing a new window, but they ignored the cost to the shopkeeper. As the shopkeeper was forced to spend his money on a new window, he could not spend it on something else. For example, the shopkeeper might have preferred to spend the money on bread and shoes for himself (thus enriching the baker and cobbler), but now cannot because he must fix his window.

Thus, the child did not bring any net benefit to the town. Instead, he made the town poorer by at least the value of one window, if not more. His actions benefited the glazier, but at the expense not only of the shopkeeper, but the baker and cobbler as well.

Excellent. It is an argument worth remembering next time someone suggests that spending money on public works is, of itself, good for the economy. (Yes, someone is employed. But taxes are taken sooner or later from someone else to pay him. That someone else would otherwise have used the money to buy something else from a third party.)

It really is a pity they don't teach Bastiat in British schools. Then Gordon Brown might have read him. But then Gordon Brown thinks he can spend your money better than you can.

There are plenty of books on Bastiat. Here is one published by the Institute of Economic Affairs.

Posted by James Bartholomew • Indexed in Tax and growth

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