Icon  Name                    
[DIR] Parent Directory
The Broken Broken Window

The parable of the broken window is an economic fallacy. Put simply:

If money is spent on repairing damage, it is a mistake to think this represents an increase in economic output and economic welfare. If money is spent on repairing a broken window, the opportunity cost is that individuals cannot spend money on more productive goods. The broken window doesn’t increase overall output — it merely shifts an economy from productive output to maintaining the existing situation.

The key phrase is "it shifts the economy from productive output to maintaining the existing situation". There's often a debate about whether the fallacy is really a fallacy, because it often really looks like destruction has lead to increased production (reading this Hacker News article is what got me thinking about the question). I think it's clear that the destruction of value is simply the destruction of value — the world is a poorer place afterwards. But, it's also obvious that the destruction of value can sometimes lead to increased production of value. Destabilizing a non-optimal state of equilibrium through a destructive act can often result in a much more optimal state of equilibrium. In the canonical example, imagine that the shop is badly kept — that the owner isn't really invested in maintaining it or running it well. His child breaks the window, and he fixes it, and suddenly in contrast with the new pane he sees how shoddy his shop is and decides to get his act together. This kind of thing happens all the time — you break a tool, then go out and get a better tool that makes you more productive, for example. Via Hacker News

tags: #fallacy #misconception #destruction

©Andrew Swift · top · more · contact