I think the interesting thing about this is to think how weird our economy functions, because at the end of this, all we will have is a net gain for the economy and an empty hole.
You've got a type error going on here with money. Money is just how we keep score for "getting the things we want". Is this something that we want? Apparently, digging a pointless hole, streaming it, and asking for donations is terrifically entertaining, so yes. All things considered, the holiday hole is probably the best use of those resources. Like, construction equipment usually isn't used as postmodern art, but postmodern art is something we want, so yeah.
I guess my real point is something like "why aren't you asking this question about theater or television or live music"
That parable is misleading. If his window wasn't broken then the shopowner would've invested it in some improvement to the store or as a safety cushion which would also trickle through to the relevant suppliers. We'd actually all be better off if the window wasn't broken because we should have some other investment that was equally valuable without having to lose the asset of the window.
I don't think "Parable of the broken window" captures the essence of our economy, it only mentions the handyman receiving 6 francs, and not him paying his suppliers, them paying their suppliers and so on, his tools, his rent, his taxes, etc.
> I don't think "Parable of the broken window" captures the essence of our economy, it only mentions the handyman receiving 6 francs, and not him paying his suppliers, them paying their suppliers and so on, his tools, his rent, his taxes, etc.
That isn't actually a multiplier. When the handyman is paying other people it means he isn't actually making $6. He receives $6 but then the tax man takes $2, the window costs $1, various other things cost another $2 and the handyman only keeps $1. No matter how you slice it the grand total has to be $6.
But you don't want a multiplier here anyway, because it's $6 of waste. If the $6 somehow turned into $100 then it would be that much worse.
The multiplier effect exists, but in the broken window fallacy all it does is multiply the wasted effort.
The company mining sand is wasting sand and people's time mining the sand for the broken window.
The company that melts the sand into glass is wasting time and energy making the glass for that window.
The company that transports the window to the distributor is wasting storage space, energy(gas), and salary transporting it to the retail location(Home Depot).
The retail company is wasting storage space on the window, and perhaps a couple minutes of a salesperson's time.
The handyman is wasting his time when he installs a window to no benefit.
The insurance company is wasting their time handling the claim, and is implicitly costing everyone else in their client pool time with increased premiums.
And the person whose window was broken has their time wasted working in order to pay for the new window.
Any property that any of these people use is wasted, because if your office processes claims for broken windows the portion of the rent used for office space is wasted. (For example, if you spend enough time on broken windows, you might need extra staff and therefore a larger property.)
In each of these, maybe only a few minutes, seconds, or milliseconds(in the case of the sand needed) is wasted. But the entire ripple effect is ultimately a waste. In some cases, there appears to be no effect because a company may have additional capacity already available. But if you make a complete accounting of all effects, it is all a waste.
When I look at issues in economics, I like to erase the money entirely, since money is often nothing more than an accounting tool to make a graph reduction problem easier. In the case of a broken window, all you've done when you eliminate the money is waste resources, land usage, and many people's time.
Contrast this with a new window for a brand new building: Presumably that building is being used for some productive purpose, so the entire supply chain is implicitly being used for a productive purpose.
The problem is that if you could magically remove all the waste in the economy, but didn't find new work for people to do, then all that happens is you have a lot of people out of work, which is in itself a waste. The way our economy is built, the waste from people being idle is in many ways worse than the waste from people doing things that don't need to be done, which is why politicians are always pro-jobs and never mind whether the work is worth doing.
Leaving aside money, efficiency should never be a problem because there is always plenty of work that urgently needs doing. Freeing up people to work on more important things should always be a win.
That's not the world we live in. To explain why, you need money: nobody will pay for it!
Convincing people to spend money on things that urgently need doing is the heart of the problem. The broken window doesn't have that problem. It's a waste, but it's a very convincing reason to spend money, and the shopkeeper has money, so that's what happens.
Building a new building could be a waste, too. Overinvestment happens and new buildings do stand idle sometimes for lack of tenants.
I agree that the economy exists to serve people. The fact that the economy demands people get jobs in order to be served and then doesn't give them jobs should be seen as a damning case where the economy isn't performing the function for which it exists.
If we had something like basic income then maybe you'd have a point. But spending a lot of time looking for a job and not finding one is certainly a waste. Deferring expenses (like going without medical care) is a waste. And crime causes lots of waste. So, back to broken windows again.
a) Is it really a net gain for the economy? Not really, unless this hole has some other future productive use, because you're ignoring what this money would have otherwise gone to pay for in lieu of this hole.
b) Funnily enough, the example of paying people to dig random holes is frequently given in economics arguments to illustrate why the Subjective theory of value makes more sense than the Labor theory of value.
C) Holes are made to be filled. Next year's gag is probably filling the hole back up with something.
I'd say it is a net gain. The money went to pay the company that dug the hole who used the money to pay their contractors working on the project, equipment leases, gasoline, etc. It will also end up being mentioned on the various blog and news outlets all selling ads against the story of the hole. CAH will also sell more product because of the hole & subsequent publicity. It looks like an increase in GDP (aka net gain for the economy) to me.
All the money I don't spend on absurd acts of Dadaism I just spend on liquor, which is bad for me and occasionally for those around me. So the world is probably a little bit better off for the money I spent on digging this hole.
It's meant to be useless. That's the punch line. All the same activity to burry a fiber optic cable would give you better communications in the end. Now could you make a story about laying fiber exciting? Enough for people to donate to? Maybe not.
It's technically (I say "technically", ask an economist and they will have to admit it is "very definitely") a net gain because they are selling a service and people are paying for it. The GDP is the total sum of all goods and services sold and this hole will increase that total by a small amount. I think the hole digging is hilarious and very clever. :)
GDP is gross domestic product. The problem is in the term "gross": GDP doesn't measure depreciation.
Arguably here they're pumping $X per day into a project that is also depreciating at $X per day (i.e. no net value is produced, ignoring the entertainment value of the stunt). So the project contributes to GDP but not to net wealth.
The failure to account for depreciation is one of the major problems with GDP as a measure of prosperity.
The central bank automatically equalizes over changes in money demand/velocity. That what a demand target (in the Feds case Inflation) is all about. So this action might increase velocity/decrease money demand, but it will not have a larger effect on Aggregate Demand.
I think what's interesting about this, is how you can manipulate online users by creating the perception that something is awesome and popular even if it actually isn't, using the magic of online marketing.
The only reason people think CAH is worth it, is because they think other people think it is funny and not stupid. If nobody cared about it, you wouldn't either.
I don't know if this is manipulation, CAH has a history of mocking Black Friday and making "in your face" jokes. I bet most people who send the money did it because they share the sentiment behind the joke, or just to have something fun to say to friends next time.
That hole ain't gonna stay empty for long. It will probably fill with water and provide a habitat for a fairly large variety of plants and animals. Which might or might not be a net gain for the environment as well, depending on what species it attracts.
Middle-class Americans spend more money landscaping their backyard than the cost of this entire project.
As part of the total cost of home ownership over a lifetime, a lot of people probably do spend tens of thousands of dollars on their lawns. Especially if they have an HOA telling them what their front and back yards should look like at all times. Much less fun than just digging a big hole!
I guess my real point is something like "why aren't you asking this question about theater or television or live music"