Lowry should read Bastiat

27 September, 2011

So former Fine Gaeler Michael Lowry is miffed that the Government has turned down the plan he was promoting for a super-casino in Tipperary. That’s not a surprise, nor is it a surprise that the present incumbents have taken the first available opportunity to stick it to Michael, given his disgraceful and self-serving support of the last Government.  Of course it’s always possible that the fact that Lowry (whom Matt Cooper described as the most disreputable politician he’d ever met) was involved had nothing to do with the decision, and that it was made entirely on its merits. Anyway, the decision was undoubtedly the right one, whatever the reasons for it.

The Irish Times reported that

Mr Lowry …. said he wanted to support plans that would bring an economic boost and up to 2,000 jobs to his Tipperary North constituency….Thurles Chamber of Commerce president Austin Broderick said the area was “totally devastated” by the Government’s refusal to allow a large casino. “It’s unreal. One thousand jobs gone down the Swanee…”

Here we go again, with alleged job creation/saving potential being used to justify everything from continuance of dodgy tax breaks to loss-making capital investments, to opening yet more shops.  John Kay has neatly disposed of similar fallacies (see here), but to see the rebuttal done elegantly and forcefully, one needs to travel far back in time and read the works of Frédéric Bastiat (1801-1850), particularly his famous Parable of the Broken Window.

In Bastiat’s tale, a man’s son breaks a pane of glass, meaning the man will have  to pay to replace it. The onlookers consider the situation and decide that the  boy has actually done the community a service because his father will have to  pay the glazier to replace the broken pane.  The glazier will then presumably spend the extra money on something else,  thus helping the local economy. The onlookers come to believe that breaking  windows stimulates the economy, but Bastiat exposes the fallacy. By breaking the window, the man’s son has reduced his  father’s disposable  income, meaning his father will not be able purchase new shoes or some  other luxury good. Thus, the broken window might help the glazier, but at the  same time, it robs other industries and reduces the amount being spent on  other goods. Net result: a loss to the economy overall.

Building a super-casino in Tipperary may create jobs, but overall it will have a negative effect on the economy as it will divert limited investment capacity from more sensible (and more socially responsible?) projects which, as it happens, would also create jobs.

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