The broken window…. An elementary fallacy. Anybody, one would think, would be able to avoid it after a few moments’ thought. Yet the broken window fallacy, under a hundred disguises, is the most persistent in the history of economics. It is more rampant now than at any time in the past. It is solemnly reaffirmed every day by great captains of industry, by chambers of commerce, by labor union leaders, by editorial writers and newspaper columnists and radio commentators, by learned statisticians using the most refined techniques, by professors of economics in our best universities. In their various ways they all dilate upon the advantages of destruction.
– Henry Hazlitt, Economics in One Lesson, chapter 4.
Henry Hazlitt (1894–1993) was a journalist turned economist and philosopher and overall giant of free-market thought. He was best known for his regular Newsweek column, “Business Tides” (1946–66), but also wrote for The Wall Street Journal, Nation, American Mercury, and New York Times, among other publications.
His list of books is impressive, and he became a great economist in his own right with the single work, The Failure of the ‘New’ Economics: An Analysis of the Keynesian Fallacies, a book which influenced this writer greatly in college.
For more description of Hazlitt’s career, which spanned a very dark time for classical liberalism, see here.
The Fallacy Explained
Henry Hazlitt described the broken window fallacy in chapter 11 of his classic, Economics in One Lesson:
A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies.
After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier.
As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Two hundred and fifty dollars? That will be quite a sun. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.
Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $250 that he was planning to spend for a new suit. Because he has had to replace the window, he will have to go without the suit (or some equivalent need or luxury).
Instead of having a window and $250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.
The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.
One of Henry Hazlitt’s quotations was as follows:
The times call for courage. The times call for hard work. But if the demands are high, it is because the stakes are even higher. They are nothing less than the future of liberty, which means the future of civilization. (1)
One can state that courage is needed to puncture the myths of President Obama’s fake-green ‘Green Jobs,’ part of his fallacious government-spending-brings-prosperity New New Deal.
Henry Hazlitt’s wisdom is as needed today as when Economics in One Lesson first appeared in 1946.