The power of III

Summum ius summa iniuria--More law, less justice

05 August 2011

The Broken Window Fallacy: Learn it well

Written for my 12 year old, and shared with you.

In your political education, you need to learn the lesson below and always consider it, every time a Statist politician talks about "creating" jobs, internal improvements, etc.,. This is a key lesson to learn, one that I cannot emphasize enough:


The broken window fallacy
excerpts from ECONOMICS IN ONE LESSON by Henry Hazlitt
Chapter II, "The Broken Window"
A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Two hundred and fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever-widening circles. 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.

Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $250 that he was planning to spend for a new suit. Because he has had to replace the window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as 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 had forgotten the potential third party involved, the tailor. They forgot him 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.


One of the principle fallacies of big government economics: Job creation by central planning and redistribution of wealth.

The example below is related to the broken window fallacy as far as the lesson of what is seen and what is not seen:

(Looking at this cartoon, think about Congress' and Obama's spending hundreds of billions [American Recovery and Reinvestment Act] on "shovel ready jobs").

What is seen: The temporary shovel ready jobs, and the satisfied local union workers that got them, you know, the ones in the SEIU.

What is unseen: All the money utilized without efficiency in the making of this job creating machine, and all the things that the taxed people cannot buy themselves that would improve their lives, and support other industries and other peoples jobs). This is a cost in your money, and your freedom to choose what you'll do with what you've worked for.

NOW, having been armed with the lessons above, you are better equipped to read, understand, and criticize this kind of article, by  Commissar (er, I mean Congresswoman) Nancy Pelosi, of the People's Republic of San Francisco.

Knowledge of economics should determine your politics.

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