Parable of the broken window and 1929 crisis

The major wars of the 20th century have certain things in common with the .COM boom and the so called 'space race', but are not comparable, in the same respect, to more historical armed conflicts - examples being the Gallic wars of Julius Caesar or, for example, the War of 1812.

The opening question is: what's the difference between building a house and launching a Mars expedition? When one builds a house, much of the infrastructure for construction and materials production is already in place: one has wood, concrete, plumbing, wiring, and appliances available at one's fingertips. The contractors are standing by with bulldozers, concrete trucks, nail guns, and pipe benders.

In comparison, the Mars expedition incurs a huge amount of trial and error improvisation all along the supply chain - one is building a lander, on-planet housing, water purification, food production technology, launch facilities, instrumentation, and so forth. Therefore one has to build infrastructure to build infrastructure. When one observes the progression of the US space program, one sees vast amounts of innovation in electronics, materials, life support, computation, facilities construction, 'food engineering', and so forth. The .COM boom required the production of vast quantities of routers, fiber, servers, network software, browser software, email servers, etc. These put an inordinate demand on the entire global workforce.

What one sees in WW I is innovation in submarines, aircraft, diesel engines, airships, and tanks, and in WW II innovation in nuclear physics, electronics, aircraft, submarines, radar, and codebreaking. This was not merely 'putting a lot of people to work' in factories, as well as on the front, it also demanded all out effort from academics, scientists, engineers, and designers. The distances involved, particularly in the Pacific theater, demanded a lot of work just to ship things around. Someone growing corn and raising chickens wasn't merely feeding troops, but merchant seamen, transport pilots, road builders, truck builders, and so forth.

WW II was a vast waste of human potential and treasure, however what was left over contributed significantly to the economic boom of the 1950s. One can see at least three influences: the first is the production resources created during the war, the second is the new technologies, and the third is the workforce that had learned how to make and operate all this new stuff.

Much of WW II was fought over enormous distances, and in certain respects this meant that a lot of the war effort was logistical rather than belligerent. The United States had to maintain supply lines to Britain, Australia, the Philippines, and China at various stages of the war, including transportation by sea and air. At the end of the war, much of this was immediately pressed into civilian service.

Bastiat is wrong. Utilitarianism, the idea of subjective valorisations of utility as opposed to price, has been rejected because it is fundamentally incoherent: subjective utilities are incommensurable and thus unvalorisable. The reason for this is that the subjective process of desire is incommensurable between individuals. Even if we both price ice-cream purchases at 50c, the ice-cream gives me a lactose intolerance response but delights you. This is precisely why mainstream economics doesn't present a theory of value, but a theory of price. You can valorise subjective assessments of price based on the model's conception of a price optimising agent with needs.

The point of the broken window fallacy is that it outlines the limits of GDP. Repairing a broken window increases GDP (exchange values in circulation), but reduces actual use-values. One of the reactions of Marxist economists to Fordism was to hypothesise two more Departments of production—III (Waste) and IV (War)—in addition to I (Capital goods) and II (Consumption goods). The only difference with Departments III and IV is that the value doesn't circulate or become embodied in the satisfaction of the desires of labour or capital as such.

The central problem is your misunderstanding of the broken window fallacy: the market doesn't measure useful-values except to the extent they satisfy some need (window repair, murdering central europeans). Whether the "use-values" are deemed to be moral is beside the point, the presence of a use-value allows the commodity to bear and realise exchange-value. Heroin has a going price on the market, and the sale of heroin contributes to the gross product.

(There's a version amenable to mainstream economics of the above critique as well. It runs roughly the same: utilities are not prices.)