Oddbean

War is always bad for the economy. You can see this clearly if you ignore all the money, the pieces of paper with dead presidents inked on them, and the bits in the computers. Money can psychologically manipulate people, but fundamentally money is just an accounting system. You can always look strictly at the real economy, real goods and services, and see whether things are improving or degrading. War directs people away from production and towards destruction. People who could be growing carrots or building iPhones instead build bombs that are one-time use, and destroy not only the materials and effort that went into building them, but also the target. In aggregate war causes people to produce less and destroy more. Henry Hazlitt's "Economics in One Lesson" Chapter II "The Broken Window" explains how this can be true while at the same time there can be the appearance of being good for the economy. "A young hoodlum, say, heaves a brick through the window of a baker's shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread an pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Two hundred and fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $250 more to spend with other merchants, and this in turn will have $250 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in every-widing circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor. Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazer will be no more unhappy to learn of the incident than the undertaker to learn of a death. But the shopkeeper will be out $250 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer. The glazier's gain of business, in short, is merely the tailor's loss of business. No new "employment" has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye." -Henry Hazlitt, Economics in One Lesson