England & broken windows

In bigging up the significance of Wednesday's game, the Times gives us an example of Bastiat's broken window fallacy:

Involvement in a significant [football] tournament sends the nation’s fervour soaring and that means open wallets on the high street. The British Retail Consortium estimates that last year’s World Cup boosted UK retail spending by more than £1 billion. In a grim summer with no involvement in Austria and Switzerland, more than half of this cash would remain unspent. At the very least, pubs, clubs, off-licences and the advertising and gambling industries would miss out on some £600,000 of spending.

What this misses is that the billion we spent last summer would almost certainly have been spent anyway.
Had we not bought beer on the high street to drink whilst watching games at home, we'd have gone down the pub instead. If we hadn't bet on the results, we'd have drank more. And  if we hadn't bought flat screen TVs to watch England, we'd have bought them to view Calleigh Duquesne anyway.
Indeed, it's possible that England's participation in the World Cup actually depressed economic activity, as people sloped off work to watch games, and went to Germany thus spending money there that they'd otherwise have spent here.
The only way in which England's participation in a major tournament can really boost economic activity - and this only in a Keynesian economy - is if it lifts people's spirits and depresses the savings ratio.
But there's little evidence that this happens. Yes, the savings ratio was high in the 1970s, as England failed to qualify for the 1974 and 1978 World Cups. But this probably had more to do with high inflation and economic volatility than with England's craptacularness.

Comments

[Trooper Thompson]

It's always good to see Bastiat's name in print, and always worth reminding people to pay attention to what is unseen as well as what is seen.

[Ian Bertram]

I never cease to be amazed at the variety of ways you can dream up to work in a picture of some totty!