Economics 101

Are Broken Windows Really a Cause for Celebration?

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The dominion we are given by God is powerful. We exercise this dominion through our work (Gen. 2:15). To do our work to the utmost glory of God, we need a sound institutional setting that encourages creativity, productivity, and innovation while minimizing poor decision-making.

One threat to such a setting is that too often the long-term consequences and secondary effects of an action are ignored.

Recognizing Consequences in Different Situations

It is easy to count consequences when they are obvious and immediate. Racing through a red light can pose significant, personal costs upon us. We don’t take that decision lightly. There are powerful incentives at work that force us to count the costs of that action.

Why might we ignore unseen consequences?

  • Long-term consequences are easier to deflect.
  • The costs may not be directly applicable to us personally.

In the public square, we make decisions in large groups. Often, one smaller group benefits at the expense of a widespread, larger group. In these instances, we may choose to ignore the very real long-term consequences of our decision-making.

Are Broken Windows Really a Cause for Celebration?

French economist Frederic Bastiat called this the difference between the seen and the unseen. As Christians with the power of stewardship, we don’t have the luxury of ignoring the unseen. We must think carefully about all impacts of our decisions, public and private.

Bastiat tells the story of the Broken Window Fallacy to illustrate the seen/unseen dichotomy:

Have you ever been witness to the fury of that solid citizen, James Goodfellow, when his incorrigible son has happened to break a pane of glass? If you have been present at this spectacle, certainly you must also have observed that the onlookers, even if there are as many as thirty of them, seem with one accord to offer the unfortunate owner the selfsame consolation: “It’s an ill wind that blows nobody some good. Such accidents keep industry going. Everybody has to make a living. What would become of the glaziers if no one ever broke a window?”

In this example, one small window is broken. We learn that we are not to celebrate that the glazier now gets business because we realize resources had to be destroyed for that business to come his way.

In the realm of public policy, we see more egregious violations of ignoring “the unseen.” This is what economist Paul Krugman had to say after 9/11:

First, the driving force behind the economic slowdown has been a plunge in business investment. Now, all of a sudden, we need some new office buildings. As I’ve already indicated, the destruction isn’t big compared with the economy, but rebuilding will generate at least some increase in business spending.

Christians are people of hope. We are called to bring about flourishing. It is one thing to pray that good can come out of tragic events and circumstances. It is another to completely ignore the massive damage that occurred that now “requires” new business spending.

This robs people of future opportunities because that “new spending” could have been used to produce something new instead of rebuilding.

How We Got Here

Over the past 200 years, the Western world has experienced capital accumulation and wealth creation unprecedented in human history. There is now more hope than ever that we can eliminate abject poverty across the globe in the coming decades.

We didn’t get to this place because catastrophic events provided opportunities for us to “spend more.” We got here because we live in an institutional setting that encourages our God-given creativity.

As Christians, we must encourage sound institutions that foster our creativity and mitigate our greed. Making efforts to see the unseen is the call of stewardship.

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