The Broken Window Fallacy

Does destruction create jobs? After natural disasters, terrorist attacks, and wars, some people argue that these disasters are good for the economy, because they create jobs and prosperity. As Prof. Art Carden of Samford University explains, this is an example of the “broken window fallacy,” a term coined by Frederic Bastiat. When a shopkeeper’s window is broken, he will spend money on a new window, which gives income and jobs for glaziers. This activity is “seen,” but the “unseen” is just as important: the money spent on a new window could have been spent on other things. Wealth has not increased; it has only been reallocated from some people to others, and society is worse off by one window.

9 Comments

  1. Matt Wavle

    It’s amazing how easily some people can believe that "destruction creates prosperity."    As a shop owner, let me tell you, I’d much rather have a new suit, than to have to replace a broken window that some punk breaks with a brick.  Ask your favorite non-thinker friend to actually place himself in the place of the shop owner, and then be honest about what HE would rather spend his hard earned money on.

  2. Brian Phillips

    This is along the same line as digging a hole just to have someone else fill it.  It’s massively inefficient and you ultimately get nowhere.

  3. Nick Picini

    This is like Keynes’s argument concerning unemployment in book 3 of his General Theory of Employment, Interest and Money: "If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment…" It misses the real issue that this money doesn’t just appear from nowhere, somebody or people will be affected. We do not generate stable wealth by hurting others.

  4. Scott Blinkhorn

    It always amazes me how few people understand this concept. This phenomenon is particularly annoying when it comes to large scale military spending. Advocates of a large military like to claim that they creating jobs and wealth.  However this claim is quite dubious as 1) the funds for the spending were taken out of the economy in the form of taxes 2) had the funds been left in the economy it is likely the market would have allocated them more effervescently 3)  a great deal of military equipment is destroyed as one might expect.  

  5. A.j. Olding

    "Destruction does not create prosperity."

    Its insane that we even need this to be explained.

  6. C Myers

    Keynesian theory has an explanation for this. You might be imagining that the resources used to dig up these notes are being relocated from somewhere else where they might have been used more efficiently, but Keynes posited that when you stimulate the economy this way, you’re putting unemployed resources to work. A lot of people misread Keynes and assume he meant government spending is always good, but he really said that this should only be done when there is less than full employment, otherwise, you’re right, resources would be simply relocate from their more productive uses.

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