Sunday, April 10, 2011

The Broken Window Fallacy

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


  1. Never heard of the fallacy of composition?

  2. Thanks for the comment Michael. IMO the "fallacy of composition" is simply, and ignorantly, misused by Keynesian economists to support a statist agenda.

    It won't work here. The "Broken Window Fallacy" survives unbroken in spite of your attempt to throw a wrongly applied fallacy through it.

  3. Except... this does happen, and it has nothing to do with the state. Products are built to break in order to force you to rebuy them. Companis spend a lot of money researching how much utility must be expected from a product in order for the consumer to not feel ripped off, while still being made in a shoddy fashion so that consumption remains high.

  4. Bret is right. Any corporation which encourages you to (metaphorically) toss out your old windows and replace them with new, more fashionable windows--or sells you windows designed to break after five years--is promoting the broken window fallacy just as much as a government which takes money to dig and fill in holes. I'd argue that this is even true (to a lesser extent, since you at least have a net gain in windows) for a company which convinces you to go out and by 5 new additional windows which you don't really need.


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