One of the fundamental fallacies of economics is called the “broken window” fallacy. It’s used to justify all manner of government job-creation schemes, and it betrays a fundamental ignorance of basic economics. It goes something like this: “Riots or natural disasters are good for the economy, because they create jobs replacing the broken windows, and repairing broken buildings and infrastructure.”
The fallacy comes, of course, from ignoring the cost of the destruction. Which country would have more wealth: one that builds ten cities, or one that builds, destroys, and rebuilds the same city ten times?
The same resources are required in both cases, and just as many “jobs” are “created.” In fact, in the second scenario, even more “jobs” are “created” than the first, because we have a full employment program for city demolishers, as well as city rebuilders. Now, of course, when a hurricane hits Florida, and federal aid comes in, it does temporarily improve the “economy” of Florida, in the sense that there are new jobs that need to be filled, but it comes at the cost of damaging the national economy, by taking resources that could have otherwise been employed in creating new things, rather than restoring old.
The same logic would also dictate that a farmer, rather than waiting until fall to harvest his crop, should instead hire many more laborers, and every week, plow under the plants and replant the fields. I hope that these illustrations are sufficient to demonstrate that neither natural or human-caused disasters are good for economies.
Unfortunately, many well-meaning space advocates make a similar error when they argue thusly: “People shouldn’t complain about all the money that goes into space. Not a single dime goes into space. It all stays here right on the ground, providing jobs for scientists and engineers, who then spend their salaries on the local economy.” There was even a Chase Econometrics study performed back in the early eighties, which many activists continue to cite, that came up with a “multiplier effect” of something like fourteen times, for the benefit of spending money on space activities.
The problem with such analyses is that they don’t consider the opportunity costs. It’s possible, even likely, that money spent by private individuals, pursuing their own ends, would have an even higher “multiplier effect.” And in terms of the money being recirculated in the economy, that will happen regardless of what the scientists and engineers do, even if they sit home and do nothing, as long as they get paid.
It is not sufficient to say that we are creating jobs. We have to ask, are we creating wealth? Unfortunately, while that occasionally happens with government space expenditures, most of the time, it does not, and to the degree that we do produce useful things with NASA funds, it is done very inefficiently, because of the need to satisfy political imperatives. And until we recognize space as a potential new venue for the creation of wealth (as opposed to “exploration” and “science” and “international cooperation”), it will not be possible to raise the private investment funding needed to actually achieve that potential.
