The Baker’s Dilemma 

 July 6, 2013

By  Oak Norton

Broken Glass Pane

Can the destruction of property ever be considered a good thing?

The French economist Frederick Bastiat wrote a parable about a baker who has his window broken and the economic effects of that event. Pretend this happened today and the baker must now spend $500 getting the window replaced. Some people may actually view this as a positive event that will stimulate the economy. This happened after World War II when the rebuilding of Europe put many people to work and many people viewed it as a positive thing to provide so much employment.

Discuss: Who are all the people who benefit from this act of vandalism?

The window maker and installer; those who provided the glass and metal materials to make the window, and those who mined the raw materials to begin with. Their families can now spend the money they’ve earned on what they want.

Discuss: Isn’t this good though? These people have work.

Yes, but it’s not sustainable work. Temporary work gives a false sense of your business climate. What if someone suddenly had a lot of temporary work and decided to expand their operations, but then when the temporary work went away, their work shrunk but they still had to pay on their expanded factory construction?

The baker also suffers. He has to divert his attention away from his business to get the window fixed, and direct his money toward fixing the window when he may have had other plans.

Discuss: What might the baker have used the money for if the window wasn’t broken by a criminal?

Perhaps he had been planning to hire a new worker, purchase a new piece of equipment, or buy some new clothing for his family, all of which employ other people in productive ways, benefiting them without the destruction of valuable property which must be rebuilt.

Discuss: To carry this to an extreme, which Bastiat did, consider a war that destroys an entire city. Is this a value to society because now so many people will be employed rebuilding the city?

Destruction of property is always a net loss to society. When something of value is destroyed that must be replaced, the capital that had been accumulated might have been used to increase property values instead of being wasted to rebuild the value that was there previously.

One parallel here is when special interest groups petition government to give them some of society’s accumulated wealth for their projects. Money could have been used to benefit the business owners but instead is used for things that may not succeed because the price wasn’t paid to build the business based on market demands (For example, look up Solyndra).

(Featured image by Oleg Fedotov @123rf.com)

Oak Norton

Father of 5 children, husband to 1 amazingly patient woman, entrepreneur, and education advocate.

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