The Seen and the Unseen
The Broken Window Fallacy says that destroying something (breaking a window), and then fixing it (hiring a glazier), stimulates the economy. The broken window fallacy was first described by the French economist Bastiat in 1850.
In the broken window story, a hooligan breaks the baker's window. The baker then pays a glazier to fix his window. However, this does not stimulate the economy. If the baker didn't have to pay for fixing his window, he might have bought something else (a new suit from the tailor) with the money.
The point of the broken window fallacy is that we can see what we get after the window is broken. We see the glazier getting paid.
However, we can't see what we don't get. We can't see the the tailor not being paid.
Irene's Broken Window in Hartford Township
There has been a lot of destruction of roads and property in my township. Irene broke the windows, for sure. However, it is a small town, the money has to come from somewhere, and this article in the Valley News describes the "unseen." The article describes some of the things my town had hoped to do, but will not be doing in the near future, because we have to fix the roads.
The town has decided to:
- cancel the Glory Days of the Railroad Festival this Saturday, because there is too much clean-up to be done
- cancel or postpone a bond to fix up the ice rink
- cancel or postpone a bond to fix up the town hall, a drafty and energy-inefficient Victorian edifice
After Irene, the town will see people employed on the roads, but people will not be employed to improve the municipal building or ice rink. What we don't get is visible in this case. We won't have a festival, we won't have a good ice rink, we won't have insulation in the municipal building. We will get the roads fixed, but we will be poorer (less fun, no improved town infrastructure) due to Irene's broken windows.
The "unseen" is visible in my township, and it isn't pretty.
In recent weeks, I wrote two articles on the jobs effect of nuclear decommissioning. Governor Shumlin repeatedly states that decommissioning Vermont Yankee will be a great jobs bonus and economic stimulus for the southern part of Vermont. He claimed that "several hundred" plant workers would continue to be employed for "five to six years." The Governor also said that decommissioning would "fuel the economy" of southern Vermont by a billion dollars over ten years.
Who is the Glazier in Decommissioning?
Decommissioning a working power plant is like throwing a brick through a window. It doesn't take many highly skilled people (compared to running the plant). It doesn't take much money (compared to running the plant).
The "glazier repair bill" isn't the actual decommissioning costs, though they may be part of the bill. (It depends on how you look at it.) The true repair bill is
- the cost of either new power plants (which will be needed eventually, but this is twenty years too early)
- and/or the higher cost of power bought from out of state.
Out of state power is far more likely: we are already buying nuclear power from Seabrook. New power plants and transmission lines in Vermont usually attract fierce opposition. I think we will buy from out of state. Governor Shumlin practically commutes to Canada, setting up new power deals.
Vermont will spend our money on out-of-state glaziers. We will see the money be spent, money that could have "fueled" the Windham County economy for twenty more years. What we would have spent the money for, here in Vermont...that will be unseen.
In a recent post, I described the broken window fallacy in terms of the possible job stimulus of Hurricane Irene's destruction, or of decommissioning a nuclear plant. In both cases, destruction is not a job stimulus.
I also have two articles on decommissioning. My first article, Decommissioning Vermont Yankee: the Governor vs. The Facts, appeared in True North Reports on August 14. This showed that 80% of the plant employees would be laid off within six months to two years.
My second article was posted yesterday: Will Decommissioning Vermont Yankee Funnel a Billion Dollars into the Vermont Economy? The answer is "no." In a ten-year period, about $200 million can be expected in salaries for contract workers decommissioning the plant. If the plant is running, in ten years, $650 million in salaries are earned by plant employees. In other words, plant-related employment would drop by about two-thirds. Scarcely an economic boom!