The Broken Window   2 comments

The art of economics consists in looking not merely at the immediate, but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group, but for all groups.

This is an ongoing series based on Henry Hazlitt’s Economics in One Lesson. You can access the Table of Contents here.

 

Having set his lesson out clearly, Hazlitt started with every libertarian’s favorite economics lesson, Bastiat’s broken window.

Image result for image of broken windowA Democrat protesting Trump’s election heaves a rock through a window of an Internet startup. The CEO runs out, pissed off, but the jerk is gone. A crowd gathers to stare at the shattered glass and to avow that the misfortune has a silver lining. The broken window will employ a window-replacement shop. It might cost the young Internet entrepreneur a few hundred dollars, but that few hundred dollars will help the glass shop. It will turn over some cash in the economy. The glass shop will spend $300 somewhere else. The smashed window will provide money and employment to an ever-widening circle. So, the spoiled brat who expressed his anger over the election result by smashing the window of someone who had nothing to do with the election actually turns out to be a public benefactor.

By the way, Economics 101 at University of Alaska Fairbanks 1980 — I was the only one in the class who said “But what about what the baker meant to spend it on in the first place?”

Yes, the broken window does mean the glass shop makes some money. The shopkeeper (a baker in Bastiat’s story) is out whatever the glass cost him. Had the glass not been broken, he would have had a window and a new suit, Bastiat explained. He will now have to go without a new suit (or some equivalent need or luxury). He now only has a window. The community has lost one suit that otherwise would have been sold. The glazier’s gain is the tailor’s loss. No new “employment” was gained. The crowd is thinking short-term and limited. They have forgotten the potential third party involved.

They had forgotten 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.

This is Part 3 of a series. If you wish to read the whole thing, click here to access the table of contents.

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