The Broken Window Fallacy

This short video explains one of the most persistent economic fallacies of our day.

Made by Sam Selikoff and Luke Bessey.
See Luke's page: http://www.youtube.com/lukebessey
See Sam's blog: http://lonelyliberal.tumblr.com/

• Category

  Education

[Steven Campbell]

Someone should have Obama watch this

[utarian7]

He knows - they all do. They're just sociopaths that don't give a fuck.

[David Waxman]

The Broken Window Fallacy paints a picture of economic principles that are not taught in a clear and effective manner in in our education system. I have no answers. Why main stream government policy makes do not take a closer and careful look at this video.

[Gowuffie]

Exactly.

[aldogoopio]

Had the hooligan not break the window, the baker might just hoard his money. because the window broke, the baker releases the money to the economy rather than just to hoard it.

[Gowuffie]

Exactly. This isn't an economic fallacy at all. It generates urgency in spending and that will stimulate the economy more than having multiple choices as to how to spend your money. The fallacy is that this is always for the greater good of society - which is obviously nonsense.

[trygvb]

If someone blows up New York City, the economy WOULD be affected. We would have to spend a TON of money just to repair things to how they where before. This money would have been used in other ways, which would have created jobs and production elsewhere. Net production would drop because of destruction. Less supply = higher prices.

[FutureLaugh]

yes but the money doesnt disappear, it just goes to the hands of the electrician. Now he can spend his capital according to what he chooses the same way. The only thing difference is breaking a window is a malicious act vs an act of god is when the power goes out. Im still trying to understand the only negative aspect to getting a window broken or losing power isnt that it is bad for the economy- but that you lose the choice of how you want to invest capital. The economy is unaffected.

[trygvb]

Yes, my argument rests on the fact that government doesn't allocate resources as efficiently as the market. My example was roads that don't need fixing and the government paying money for them to be fixed. These jobs were created primarily to do just that: to create jobs. Another example would be subsidies to businesses such as solar panel companies. If these solar panel companies should exist, they should be able to make a profit on their own. I don't want bureaucrats altering the market.

[pneudmatic]

Your argument rests on the assertion that roads are being replaced that don't need to be. I doubt your assertion and the only support you offer is your personal guarantee. I'm not (necessarily) taking a political stance here. I'm pointing out that people shouldn't accept the conclusion of any argument unless they can accept its support.

[trygvb]

How about to respond to what I said because apparently you missed what what I said. And by you just saying "citing evidence is much more convincing," you just avoid a response. Does it matter if I said "I guarantee" or not? No because that had nothing to do with what I said after. I simply said that I guarantee that you've seen these construction workers because I was pointing out it was common. Instead of starting side arguments, how about you respond my main point.. If you can understand it

[pneudmatic]

My comment is directed at the straw man argument - Spending money on repairing vandalism replaces the real issue of spending money on maintaining infrastructure. Citing evidence is much more convincing than statements like 'most public work[s] projects' and 'I guarantee'.