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    Recent Tornadoes and the Broken Window Fallacy

    06/02/2011

    In the wake of the deadly tornadoes throughout the Midwest and Massachusetts, our hearts and thoughts are with those harmed by these terrible tragedies, which have cost hundreds of deaths and destroyed infrastructure, homes and businesses.

    The mainstream media would have you believe that there is a silver lining to these natural disasters. In a New York Times’ article titled Reconstruction Lifts Economy after Disasters, the author Michael Cooper alleges that these tornadoes are actually a “boost” to the local economy. Cooper states that “no one would suggest that disasters are a desirable form of economic stimulus.” The truth is that these disasters are neither desirable nor a form of economic stimulus.

    Similar assertions are far too common after natural or man-made disasters. It has become almost inevitable. We cannot prevent natural disasters but we can put an end to economic fallacies once and for all. All New York Times writers should pick up a copy of Henry Hazlitt’s—who used to write editorials for the Times—classic book Economics in One Lesson. As Henry Hazlitt wrote in his myth-busting book, “economics is haunted by more fallacies than any other science known to man." One of the most dangerous and common economic fallacies is the broken window fallacy.

    Frédéric Bastiat first developed the broken window fallacy in a famous piece called That Which is Seen, and That Which is Not Seen. Nearly one hundred years later, in 1946, Henry Hazlitt famously retold the story of the broken window in his best-selling book. Imagine that you witness a small child breaking a window by throwing a rock through the local bakery’s storefront. The correct response would be to scold the child for causing harm. Bastiat notes, however, that spectators will usually comment that the broken window will provide employment for the glazier, thus boosting the economy.

    That is simply not the case. If the window had not been broken, the baker could have used the money he paid to repair the window on something else. Let’s say that he would have chosen to buy a suit instead, which would have created work for a tailor. The baker could have had his window and a new suit. As Frédéric Bastiat said:

    It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way which this accident has prevented.

    Many us look at what is seen and ignore what is unseen. The art of economics, as Henry Hazlitt said, is looking at the consequences of a policy on all groups instead of just a select few. The broken window does not create any wealth. We see unfortunate renditions of the broken window fallacy far too often. Government officials and the media tout the fallacy to support “stimulus” programs, high taxes, war spending or tariffs. 

    We are all poorer as a result of natural or man-made disasters. Following the flawed logic of the New York Times, the economy will be better if we have even more destruction. Let’s take it to the extreme. Why not break down all the windows in an entire city? Why not bull doze down an entire housing community? Could bombing a city make them richer? Of course not. This is no way to grow an economy. Money spent on rebuilding after the destruction is money that cannot be spent on food, clothing and other items.

    Productive destruction is an oxymoron. As Bastiat said "society loses the value of things which are uselessly destroyed." The broken window fallacy never seems to die. Hazlitt’s tale of caution bears re-reading after every single natural disaster.