Economics Questions

Re: Is the broken window fallacy flawed?

Wheylous — Fri, 07 Sep 2012 03:15:33 GMT

There's a twist thrown in if the baker would rather save the money rather than buy new shoes, but that's a different discussion - not about whether production increases, but of how resources are (mis)allocated.

Re: Is the broken window fallacy flawed?

grant.w.underwood — Thu, 06 Sep 2012 03:45:36 GMT

NOPE Im not buying this broken window thing either. I'm going to go around my neighborhood destroying everyone's property. When my neighborhood becomes more affluent than Jupiter Island then we will have our answer. Hell if everyone just breaks each others property then we can just all hire each other to fix it! UTOPIA. we can all quit our jobs and go into construction. We will finally get a stable economy, without booms and busts, and equal pay. Shoot, i'll even lobby some buddies in DC to get this sh** MANDATED. You're welcome.

Re: Is the broken window fallacy flawed?

Kelvin Silva — Thu, 06 Sep 2012 03:44:27 GMT

It does not say that the community lost a suit. It is saying that the baker could have bought a suit when he needed it instead of a window.

Spending money NOW (window) vs Spending money later (suit).

Think of it as taking 1 cup from the deep end of the pool and pouring it at the shallow end. Does the pool gain more water?

Re: Is the broken window fallacy flawed?

fegeldolfy — Thu, 06 Sep 2012 03:35:55 GMT

Ah, I didn't think about that. Good point.

Re: Is the broken window fallacy flawed?

z1235 — Thu, 06 Sep 2012 03:31:18 GMT

fegeldolfy:
But suppose the windowmaker buys a suit with the money he gets from the baker. Does this not add a suit to the community just as the baker buying one would?

There's still a window missing -- a new one that the windowmaker could have installed with the time and materials he used up to replace the baker's broken window. It's simple really: The only difference for "the community" before vs. after the breaking of the window is a loss of one perfectly good window. Only through the vudu magic of Keynesianism can this simple realization be perverted into a gain for "the community".

Re: Is the broken window fallacy flawed?

Bogart — Thu, 06 Sep 2012 03:20:06 GMT

You are not accounting for the resources that went into replacing the window. The act of destruction decreased the wealth of everyone especially the baker.

Re: Is the broken window fallacy flawed?

John James — Thu, 06 Sep 2012 03:15:56 GMT

You basically have the story right. (Good job!)

But you're forgetting about the window that was lost. No matter what you do, or all the new things that get produced...no matter how you slice it, without the hoodlum committing his vandalism, you'd have all that stuff plus an extra window.

For anyone interested in resources on the fallacy, see the Mises Wiki article (in particular the links section)...

Parable of the broken window

There was quite a bit of discussion in this thread:

Discussing with a Keynesian -broken window fallacy..need some help!

Is the broken window fallacy flawed?

fegeldolfy — Thu, 06 Sep 2012 03:12:36 GMT

So, as far as I can tell, the broken window fallacy is as follows.

A hoodlum throws a brick at a window of a bakery, breaking it. The community gathers around to discuss what happens. The initial reaction is that it's a bad thing, since the baker will now have to buy a new window. J.M. Keynes comes along and explains that it's actually a good thing, since the baker will give money to the windowmaker, who will then spend that money somewhere else, and so on, thereby stimulating the economy. Then, Frederic Bastiat shows up and explains that Keynes is wrong because he simply focuses on what is seen and not on what is not seen. Bastiat explains that the money the baker had to spend on a new window, could've been used by the baker to buy a new suit. However, because of the hoodlum, the baker does not have a window and a suit, but just a window. Therefore, the community as a whole has lost a suit.

But suppose the windowmaker buys a suit with the money he gets from the baker. Does this not add a suit to the community just as the baker buying one would?