Parable of the broken window

What we see and what we don't see

This article will explain the most fundamental economic fallacy. You may have even utilized this assumption in everyday discussions. However, you'll notice how many politicians employ this fallacy to deceive the uninitiated. With this and subsequent articles, I will explain to you how to recognize and counter these flawed policies and arguments.

Let’s Start:

A young hooligan, for example, throws a brick through a bakery's glass. The shopkeeper storms out, enraged, but the boy has vanished. A swarm forms and begins to look at the huge hole in the window and the smashed glass over the bread and pies with calm delight. After a time, the audience feels compelled to philosophize. And many of the group's members are virtually likely to remind each other or the baker that, despite the bad luck, there is a silver lining. Some glaziers (Glass pane fitters) will benefit from it.

As they begin to consider this, they expand on it. What is the price of a new plate glass window? 500 rupees? That'll be significant money. After all, what would happen to the glass industry if windows were never broken? Then there's the fact that the thing is unending. The glazier will have an extra $50 to spend with other merchants, who will have an additional $50 to spend with still more merchants, and so on. The shattered window will continue to provide money and jobs in ever-widening circles.

If the audience drew it, the logical inference would be that the little hoodlum who flung the brick, far from being a public threat, was a public benefactor.

Let's take a closer look now. At the very least, the mob is correct in its first conclusion. In the short term, this act of vandalism will result in additional business for some glaziers. The glazier will be no more upset than an undertaker if he or she learns of the situation. The shopkeeper, on the other hand, will be out $50 that he had planned to spend on a new outfit. He won't be able to wear his suit because he needs to replace a window (or some equivalent need or luxury). Instead of a window and $50, he now only has a window. Or, because he was planning to buy the suit that afternoon, instead of having both a window and a suit, he would have to make do with only the window. If we consider him a member of the community, we can see how the community has lost a new suit that might otherwise have been born, and how much poorer it is as a result.

In other words, the tailor's gain of business is the glazier's loss of business. There has been no new “employment” added. The baker and the glazier were the only two people in the throng who were thinking about the transaction. They had forgotten about the tailor, who could have been a third party involved. They forgot about him precisely because he is no longer present. They'll see the new window in a day or two. Because the spare suit will never be built, they will never see it. They only see what is directly in front of them.

Bibliography:

1. Basic Economics - Dr. Thomas Sowell

2. Things seen and things not seen (Ce qu'on voit et ce qu'on ne voit pas) - Frédéric Bastiat