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On September 14, 2001, Princeton professor Paul Krugman, who won the Nobel prize in economics, wrote the following in the New York Times: "Ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could even do some economic good." Paul Krugman is what's known as a Keynesian because he believes in John Maynard Keynes's "miracle... of turning a stone into bread." (Keynes wrote a popular economics book called The General Theory of Employment, Interest and Money.) Frédéric Bastiat referred to this "miracle" as the broken window fallacy.

Is borrowing and printing money in order to spend it on government programs (i.e., the recent stimulus packages) helpful or harmful to an economy? Are disasters, war, terrorism, etc. beneficial to society because they lead to economic growth? Does destroying things in order to rebuild them create wealth or destroy wealth?

John Stossel's Broken Window Fallacy


Original posting by Braincrave Second Life staff on Aug 6, 2010 at http://www.braincrave.com/viewblog.php?id=284

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