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The Broken Window Fallacy

0 (0 Likes / 0 Dislikes) [email protected] ... and it took enormous public works program known as World War II to bring the economy out of depression Ghastly as it may seem to say this, the terror atack - like the original day of infanny which brought an end to the Great Depression - could do some economic good - Paul Krueman po 11. září 2001 Frédéric Bastiat: Broken window fallacy What is the broken window fallacy? It all starts when hulligan decides to throw a brick through the bakers window The comunnity gathers at the backery to discuss what has happened. I feel bad for that poor baker he has lost a window It is true, but if you stop and think about it maybe it is not all that bad After all the baker does have to repair its window which means the glassier will now have work to do After getting paid the glassier will probably spend his new income on some of your crops Then you will have income to spend and some even more goods and services You are right - the hooligan has actually stimulated the economy Imagine how many more jobs could have been created if the hooligen have done more damage Have you all lost your minds? Haven't you all read Frederic Bastiat's or Henry Hazlitt? You are only focusing on what is seen The money I will spend repairing the broken window While you ignore what's unseen The money would have spent on a new suit If I have bought my new suit from the tailer He would have also spend his income to spend on some of your crops So you still would have had more income on other goods and services The only difference is that I would have had both my window and a new suit whereas now I only have a window This hooligan has cost me and thus our community a new suit The story of the holigan shows us that physical damage destroys wealth. After all if the holigans act actually did stimulate the economy then society would have been better of it he had destroyed the sign, the building and the rest of the town. But the broken window fallacy is much more prevalent that it may first seen In fact it remains in the core of mainstream policy making. For example when goverment claims to create jobs by financing public works programs such as construction. It does so at the expanse of its citizens in a form of either higher taxes or inflation The citizens would have spend their tax dollars on other goods and services like refridgerators or surfboards or movie tickets which would have increased job growth in those industries Because these good will never however these potential jobs remain unseen. But they are no less real and no less important as the jobs that we do see So if you ever hear of the stimulating of war time spending, tariffes or stimulus bills Note that this is merely our old friend - the broken window fallacy - dressed in new cloathing and grown fat dressed in new cloathing and grown fat beyond recognition -

Video Details

Duration: 3 minutes and 30 seconds
Country: United States
Language: English
Views: 173
Posted by: on Aug 10, 2010

The Broken Window Fallacy

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