## Definition The **Broken Window Fallacy** is the error of counting the economic activity generated by destruction or waste while ignoring the activity that would have occurred in its absence. The name comes from an illustration by Frédéric Bastiat (1850) and is a central application of [[The One Lesson (Seen and Unseen)]] in Hazlitt's *Economics in One Lesson* (1946). ## The Original Illustration A vandal smashes a baker's shop window. The glazier is hired and paid six francs. The glazier spends those six francs on other goods. An observer concludes that the broken window stimulated the economy — money has circulated, employment has occurred. The fallacy: the baker would have spent those six francs on new shoes. The shoemaker loses a sale that now never happens. The baker owns a repaired window — exactly what he had before — instead of a window *plus* new shoes. The net result is one window destroyed (capital destroyed) and one pair of shoes not produced (consumption forgone). No new wealth has been created; spending has merely been redirected. ## Generalisation The same logic applies to any act of destruction or waste: | Seen | Unseen | |---|---| | Construction jobs from a hurricane rebuilding programme | The factories, hospitals, or homes that private savings would have financed | | Jobs saved in a subsidised industry | Jobs not created in productive industries that did not receive the tax revenue | | GDP stimulus from wartime production | Consumer goods never produced; capital destroyed | In each case, the *seen* effect is real but partial. The *unseen* counterfactual is equally real and must be subtracted to reach a correct net assessment. ## Why the Fallacy Persists Hazlitt attributes its persistence to the asymmetry between the seen and the unseen (see [[The One Lesson (Seen and Unseen)]]): the glazier is a named person; the shoemaker who loses a sale is invisible. Politicians find it easier to take credit for visible construction than to explain foregone invisible alternatives. Interest groups whose income depends on the "broken window" event have every incentive to publicise the seen and suppress the unseen. ## Epistemic Caveat The fallacy is accepted across mainstream economics when resources are fully employed. The Keynesian qualification is that in a *demand-deficient* recession, idle resources may mean the unseen counterfactual (the shoemaker's sale) is smaller — because those resources would not have been employed anyway. Hazlitt disputes that the relevant resources are ever truly idle in a free-price economy. This is a genuine contested point between Austrian and Keynesian traditions. ## Related - [[The One Lesson (Seen and Unseen)]] - [[Opportunity Cost]] - [[The Fallacy of Make-Work and Saved Jobs]] - [[Effects of Price Controls]] ## Sources - [[Economics in One Lesson (Hazlitt 1946)]]