One of my favorite games as a child was the whack-a-mole game at Chuck E. Cheese. As an adult, I play a similar game with economic fallacies. Whenever one pops up, knock it down.
In that spirit, my colleague Drew Tidwell and I fired off a letter to Time Magazine recently; one of their columnists fell for the old broken window fallacy. Drew and I must have done a good job knocking down that economic mole, because Time ran our letter in their latest issue. You can read our lightly edited missive here (second letter down).
Or if the link doesn’t work, here’s the text:
Kinsley’s latest missive in time falls prey to one of the oldest traps in economics–Frédéric Bastiat’s broken-window fallacy. Just as a broken window creates work for the glazier at the expense of the window owner, money that Kinsley hopes to inject into the economy must first be taken out of it. Add in collection costs and the usual political malfeasance, and we have a net loss to the economy. There’s more: Kinsley argues that last summer’s high oil prices were essentially a tax on consumers; the money just went to oil companies instead of the government. But he forgets that oil companies do not have control over their prices. If they did, then why would oil prices ever drop? Kinsley’s logic does not follow. Ryan Young and Drew Tidwell, Competitive Enterprise Institute, WASHINGTON
Inertia Wins! 