As photos of the devastation in Japan continue to pour in, one view is that all the rebuilding after the crisis will somehow give a temporary fillip to its economy. The reasoning that guides such opinion was famously rebutted in the 19th century by French political economist Frédéric Bastiat. The fallacy of the broken window he identified applies to Japan too: rebuilding simply takes up resources that could have been used elsewhere, and has little positive effect on the economy. Japan’s outlook is fraught, but it should not pin its hopes on a rebound fuelled by reconstruction.
Photo: Matt Dunham/AP