Randall Forsyth on “Cash for Clunkers”:
What’s especially dispiriting is that this lesson was taught more than a century and a half ago by French economist Frederic Bastiat.
A shopkeeper’s window was broken by a little boy, which made for extra business for the glazier who fixed it. Extended to the ultimate, breaking every window in town would be the ultimate windfall for the glazier. The town’s income statistics and tax revenues would record a gain.
But the town would be worse off. Their old windows would be replaced with new ones, perhaps more energy-efficient, but the shopkeepers and homeowners would be out the cost of the new windows.