May 212013


Jun 232011

CBC Loonie LogoAs with Canada Post the CBC should be another government corporation on the auction block.  Except that unlike mail delivery the CBC could fold tomorrow and few of us would miss it.  In fact, it could be argued that the country would be far better off without the CBC.

But the CBC is not primary focus of this article.  I only want to use it as an example of an economic theory called “The Broken Window Fallacy” or the “Parable of the Broken Window.”

The parable goes like this:





That was an excerpt from Henry Hazlitt’s Economics in One Lesson.  The Broken Window Fallacy was first conceived by the French economist and statesman, Frederic Bastiat who wrote it in 1848 in an essay entitled That Which is Seen and That Which is Unseen.  In over 150 years the lesson has yet to be learned.

Common examples of the Broken Window Fallacy are: war is good for the economy, government stimulus spending and inflation are means to stimulate the economy, public works projects create jobs, and minimum wage laws.

Now what does this have to do with the CBC?  On June 18th, in an article in the London Free Press by Brian Lilley we learn that

“The state broadcaster commissioned a study from Deloitte and Touche which claims its annual $1.1 billion subsidy generates an additional $2.6 billion in economic activity for the Canadian economy.”

This is incorrect for a couple of reasons.  Firstly we can think of the ever widening circle of economic activity as mentioned in the parable.  To stop at some arbitrary figure of say $2.6 billion from the $1.1 billion spent is just that, completely arbitrary.  But that is not the main error of Deloitte and Touche.  What is not seen, as Bastiat would have put it, is the effect on the economy if Canadians would have been allowed to keep their $1.1 billion.  They would have spent it on other things to be sure.  Perhaps a new suit would have been one of the millions of items bought.  But we will never know.  The CBC has taken that money and has spent it on other areas of the economy without our permission.

To complete the analogy, what if the glazier had secretly paid the hoodlum to break the baker’s window?  He would have been considered a criminal for this because he took the baker’s money with pre-meditated malice.  Now how is this different from our government taking our money knowing full well that they are going to give it to some third party to spend for their own benefit and we are left the poorer for the transaction?

The CBC in this case is the glazier, we are the baker, Deloitte and Touche would be the unthinking crowd, and the government?  The government would of course be the hoodlum.

(Originally broadcast on Just Right #205, June 23, 2011.)