From destruction economic benefits? Not on your tintype.

Break something, pay to have it fixed, fixer uses fee to buy things, etc.? Not quite.

The Broken Window Fallacy and “Blessings” of Destruction in the Real World

  • Mises Daily July 14 2015
JULY 15, 2015

TAGS Booms and BustsHistory of the Austrian School of EconomicsPhilosophy and Methodology

In the early nineteenth century, Bastiat posed the story of a young man who throws a brick through the window of a baker’s shop. We’re told that this may have a bright side — that the baker must now pay a glazier to fix the window, who will then use that income to spend elsewhere, creating a ripple effect that benefits many.

Such thinking is reminiscent of what would later be used to justify the logic behind the Keynesian multiplier. Keynes would later write in the General Theory, “Pyramid building, earthquakes, even wars may serve to increase wealth.”

The Opportunity Cost of Fixing Things

As many readers already know, such logic fails to take into account the opportunity cost of the broken window. Had the window not been broken, the baker wouldn’t have paid the glazier, but maybe he would’ve spent the money on a pair of shoes instead. The shoemaker would then have income to spend elsewhere, and the same multiplier would take place — but society would be better off by exactly one window.

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