Spain: Implications of the Parable of Broken Window
Once again I find that Xavier Sala-i-Martin does not understand economic theory. The parable of the broken window, which he explains in the video below (after the jump), says the following: A child smashes a window, and the window is being repaired for 1,000 euros. The new window has to be created, which creates a job and an income. That income is then spent by the person that produced the window, which creates another job and income and so on and so on. Question: why not smash all windows if this seems to create lots of jobs and lots of income?
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