Blithe Spirit

Break something, pay to have it fixed, fixer uses fee to buy things, etc.? Not quite.

The Broken Window Fallacy and “Blessings” of Destruction in the Real World

  • Mises Daily July 14 2015
JULY 15, 2015Matt Palumbo

TAGS Booms and BustsHistory of the Austrian School of EconomicsPhilosophy and Methodology

In the early nineteenth century, Bastiat posed the story of a young man who throws a brick through the window of a baker’s shop. We’re told that this may have a bright side — that the baker must now pay a glazier to fix the window, who will then use that income to spend elsewhere, creating a ripple effect that benefits many.

Such thinking is reminiscent of what would later be used to justify the logic behind the Keynesian multiplier. Keynes would later write in the General Theory, “Pyramid building, earthquakes, even wars may serve to increase wealth.”

The Opportunity Cost…

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