Question

28. The "Broken Window Fallacy" goes as follows. A baker comes to his shop one morning and discovers someone has thrown a rock through his window. It will cost $300 to fix, and while he is bemoaning this someone says "I know it is hard for you, but socially it is okay. Because the window is broken the glazier will be employed broken? But it does not stop there. The glazier will take the $300 and he will spend it. This will be income for someone else. And on and on it goes. The broken window produces employment and wealth for everyone." This must be false, otherwise to spur economic growth we'd just need to go around and break windows, cars, and anything else we could get our hands on. Using the concept of opportunity cost, explain why this is a fallacy. after all how could a glazier make a living if windows did not get

Answer 1

there are two central issues: looking only at the immediate consequences, or looking at the consequences for only a particular group of people or entities.

The broken window fallacy is sometimes used to give example that going to war is good for a nation's economy. Its wider message is that an event that seems to be beneficial for those immediately involved can have negative economic consequences for many others. The broken window fallacy was first expressed by the 19th-century French economist Frederic Bastiat.

This fallacy generally overlook opportunity costs or that which is unseen, either in a financial sense or other. this fallacy is considering the lucky glazier who will make some money repairing the window, but forgotten about others who will be adversely affected, such as the baker who has lost a sale during this whole procedure of getting the window repaired. the opportunity cost of getting windows repaired might be loss in sales of baker.

Thus this fallacy goes f beyond just looking for the silver lining, thinking positive, or making the best of a bad situation. It is the incorrect assumption that the net benefit is positive and hence it is a fallacy.