The Broken Window Fallacy

THE BROKEN WINDOW FALLACY

The parable of the broken window was created by Frédéric Bastiat in his 1850 essay Ce qu'on voit et ce qu'on ne voit pas or That Which Is Seen and That Which Is Unseen, to illustrate the idea of unintended consequences and choices. I like this title because it is clear and direct.

Every action/choice has a reaction/choice. When we make a decision, we see some of the consequences of our action, but there can also be unseen consequences that we do not see.

The start in the broken window chapter is a baker whose window is broken by a hoodlum. The baker has to pay for a glazier to fix his window. This would then cause the glazier to have his payment to spend on something else, and this would extend the spending. So the breaking of the glass could be viewed as a good thing in a way since it benefits many.

The fallacy of the good thing argument is that it considers only the benefits of purchasing a new window, and ignores the cost to the shopkeeper. The shopkeeper was forced to spend his money on a new window and thus he could not spend it on something else. The shopkeeper was planning on a new suit which would have been good for the suit maker, but can not use the money since he must fix his window.

So there was no real gain for anyone. Instead, the action was the actually a loss-by at least the value of one window. The action benefited the glazier, but at the expense of the baker and the suit maker as well.

HOW THREE ECONOMIC TERMS RELATE TO THE FALLACY

The three economic terms that I think relate to the broken window chapter the most for me are consequences, choice and cost.

Consequences per the course material are things that happen as a result of something. They can be long or short term and they can be visible or invisible. Every one of these bullets relates to the chapter.

The consequences of the throwing of that brick are felt by quite a few people if you look at the large picture. The...