The Broken Window Fallacy, by Frédéric Bastiat. Written in in his 1850 essay Ce qu’on voit et ce qu’on ne voit pas (That Which Is Seen and That Which Is Not Seen). The premise of the parable is that it aims to show the opportunity costs that are caused when the window is broken, and the trade-offs having to be made in fixing it. The law of untended consequences show how the act made parties of which are unseen or often ignored worse off, and therefore, society as a whole worse off. Austrian theorists cite this fallacy, such as Henry Hazlitt who devoted a chapter to it in his book Economics in One Lesson. Consider the following quote which is a short excerpt from Henry Haziltt on the broken plane of glass, what do you think of the first conclusion:
A young hoodlum, say, heaves a brick through the window of a baker’s shop. […] And several [members of the gathered crowd] are almost certain to remind each other or the baker that, after all, the misfortune [will] make business for some glazier. […] After all, if windows were never broken, what would happen to the glass business? […] The glazier will have $50 more to spend with other merchants, and these in turn will have $50 more to spend with still other merchants, and so ad infinitum. […] The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor. (Hazlitt, 1946)
Considering he doesn’t have insurance, and holding other things constant such as the publicity increasing customer revenue or having to rid the baked goods with glass on them. Learn Liberty have made a video on the Broken Window Fallacy, watch it here Source: (Carden, 2011). Or watch this video by John Stossel on the Broken Window Fallacy, Source: (Brady, 2009). Walter Block also writes on the LewRockwell.com website about it along with debunking Paul Krugmans assertions. This also can be applied to the destruction of war or natural disasters to rob society of wealth that would otherwise been spend in other industries which better employ scarce resources and to better fulfill their wants. To read more on the logical argument about the Broken Window Fallacy, read with Mises University article. Now, after reading up on the parable, consider the follow on part of the quote from above which is a short excerpt from Henry Haziltt on the broken plane of glass, what do you think of the second conclusion:
[…] But the shopkeeper will be out $50 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit (or some equivalent need or luxury). […] If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer. The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. […] They forgot [the third party tailor] precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye. (Hazlitt, 1946)
Hazlitt, H. (1946). Economics In One Lesson. Mises Institute: United States. Retrieved [05/04/2016] from <https://mises.org/library/economics-one-lesson>.
Bastiat, F. (2009). The Broken Window Fallacy. Mises Institute: United States. Retrieved [05/04/2016] from <https://mises.org/library/broken-window>.
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