December 21, 2005
Broken Windows: How the Japanese Ended the Great Depression
Talking with a friend yesterday about the two very different usages of the phrase "broken windows" in sociology and economics, I came up with this example.
Here is the cannonical Sociologists definifion of "broken windows":
A successful strategy for preventing vandalism [+], say the book's authors, is to fix the problems when they are small. Repair the broken windows within a short time, say, a day or a week, and the tendency is that vandals are much less likely to break more windows or do further damage. Clean up the sidewalk every day, and the tendency is for litter not to accumulate (or for the rate of littering to be much less). Problems do not escalate and thus respectable residents do not flee a neighborhood. The theory thus makes two major claims: 1) further petty crime and low-level anti-social behavior will be deterred, and thus 2) major crime will be prevented. Criticism of the theory has tended to focus only on the latter claim.
Economists refer to it as "The 'Broken Windows' Fallacy" and define it as follows:
The broken window fallacy consists of claiming that destructive acts (say storms, hurricanes, or terrorist attacks) will improve economic welfare by occasioning repair expenditures and putting people back to work.
One might say that the broken window fallacy sounds like a strawman when phrased this way, but it is frequently used to explain the end of the Great Depression by people who argue that it was the vast increase in government expenditures required to fight the war that finally got us out of it.
[Update: Ooghe in comments expresses a lack of clarity on why economists refer to broken windows as a fallacy. To be clear, the sociologist is arguing that if the window is broken, fixing it should be a higher priority than is necessarily apparent. The economist is arguing that you shouldn't break windows just to experience the benefits of fixing them. The two arguments don't logically conflict. But some versions of the WWII cured the Depression argument very much take the form of lets break windows so we can fix them.]
One way out of this tension is to observe that the world looked like a pretty bleak place in the 1930's as the Hitler, Musollini, Stalin, and Japan gained power at the expense of the West and more particularly as the expectations about their power increased. Given the risk that these powers might gain control of the planet and the desctruction of wealth that would ensue, it was probably very prudent not to make long term investments and to save as much as possible. One could think of German remilitarization as one sort of broken window and the Great Depression as the aggregate of reasonable responses.
The Great Depression more or less ended on December 7, 1941 when the Japanese bombed Pearl Harbor it became clear that the US was going to clean up this mess. In effect this is a view that we should not treat WWII as an expense but as a capital investment that paid off in spades.
Posted by Alex at 06:33 AM | Comments (1) | TrackBack (0)
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Comments
That the Depression ended with WWII and that the US was then a superpower is pretty standard cant, but not quite sure what tension about the ‘Broken Windows Fallacy’ that resolves (i.e. I’m not sure what has made economists refer to ‘Broken Windows’ as a fallacy in the first place, although I could venture to guess)
Perhaps the problem with applying Broken Windows outside of an urban planning context is deciding what constitutes repair work, and deciding the specifics of what type of criminality it is meant to discourage.
Posted by: ooghe at December 21, 2005 10:34 AM
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