Sunday, August 1, 2010

Some of the most powerful and important ideas are the simple ones.

Watch this short video, its mandatory.

The Broken Window Fallacy


Jason Tyra said...

Good video, but this is a little simplistic. Does anyone really believe that tearing stuff up is good for society? Of course Krugman wouldn't have suggested that we sabotage our economy to create an opportunity for economic growth!

No one ever said that more spending isn't good (to a point). But we already have enough broken windows around that we wouldn't have to purposely destroy something or invade another country to find things to spend money on. Really what's at issue here is whether centralized reassignment of wealth in the form of government taxation is the most reliable, most efficient, or most ethical method.

I think I know what you think about that. :-)

Peter Lewin said...

You are correct Jason. Yet people do commit the error of using this fallacy in more complex contexts - for example, after something is already broken they will suggest that maybe it was good thing; or in numerous policy contexts.

Its not unlike the fallacy of thinking that protectionism makes us richer. One just has to point to the conclusion that we ought therefore to cut off trade altogether to achieve maximum riches. Yet people still believe it.