The Broken Window FallacyIn Bastiat’s tale, a boy breaks a window. The townspeople looking on decide that the boy has actually done the community a service because his father will have to pay the town’s glazier to replace the broken pane. The glazier will then spend the extra money on something else, jump-starting the local economy. The onlookers come to believe that breaking windows stimulates the economy.1
Bastiat points out that further analysis exposes the fallacy. By forcing his father to pay for a window, the boy has reduced his father’s disposable income. His father will not be able to purchase new shoes or some other luxury good. Productivity has also decreased, as the time the father spends dealing with the broken window could have been put to better use. Thus, the broken window might help the glazier, but at the same time, it robs other industries and reduces the amount spent on other goods.
Bastiat also noted that the townspeople should have regarded the broken window as a loss of some of the town’s real value.
After many disasters – such as major quakes destroying property – the media finds an “expert” proclaiming that re-building will be great for the economy! Which of course ignores the economic damage caused by the destruction of property that leads to the rebuilding.
If this was truly good for the economy, we could have the Department of Defense do periodic bombing runs on roadways and bridges – since rebuilding would be good for the economy!
That is the broken windows fallacy at work – economists should know better but frequently, they will suggest to the media that rebuilding after a disaster is good for the economy.
Most of the public falls for this logical fallcy, even though it is absurd.
Today saw this example of the broken windows fallacy – yet nearly everyone failed to see the problem.
To achieve good job growth in the future, we should periodically shut down the economy and lay off or furlough up to 40 million workers. Because the subsequent growth will look great.
The chart ignores that the pandemic was fading on its own due to natural immunity, enabling Governors to allow commerce to function again, and allow workers to return to work. (Vaccines are a safer solution than NI, but NI was reducing cases by the time we ramped up vaccines, and will, fortunately, close out the pandemic soon.)
Throwing Reagan on this chart marks this is as pure propaganda messaging chart. (Why select Reagan? 1980 to early 1983 was a global recession. Reagan took office in 1981. The U.S. population was 231 million versus about 330 million today.)
This is not the way for any politician to build trust and credibility. Biden does not need to do this and should not have permitted his PR flacks to do this.
Wow – even the “fact checkers” agree with my comments. Weird.