Bus305: Competitive Analysis and Business Cycles

TUI UNIVERSITY

Module 1 Case Assignment

BUS305: Competitive Analysis and Business Cycles

Dr. Lisa Mohanty

After reading “The Broken Window”, I came to the conclusion that the author Frederic Bastiat was trying to say that destruction doesn’t help the economy as many would believe; however, it poses a negative effect on the economy. In Bastiat story, a man’s son breaks a window to his story by throwing a rock through it. A crown starts to form outside the story and many people in the crowd believe that the window breaking will be good for the economy. The father will now have to pay a window repair man to replace the window. The window repair man will then spend the money on something else, thus helping out the economy. The point that I believe that Bastiat is trying to make is that instead of help the economy, this broken window will have a negative affect if you analyzes the big picture. Instead of focusing on the window repair man, you have to realize that now money will be coming out of the man pocket to fix the broken window. Let’s say that it cost $200 to repair the window, that $200 that will now go to maintenance fees instead of some going to the local movie theater, some going to the local market, and other recreational things. To summarize what the broken window fallacy, I believe that destruction does put money into the economy; however, looking at the bigger picture is only helps the economy to a certain level. Now that I summarized the broken window fallacy, let take a look at some economical terms that all to the story.

Out of the economic terms in the PowerPoint presentation, I believe that unintended consequences, money, and assumptions apply the chapters in the lesson (mainly towards the broken window story). Unintended consequences are defined as something that happens that wasn’t planned to happen. This applies to the broken window because the boy that the threw the rock through the window know that someone would have to pay to...