Category Archives: Austrian Economics

The Broken Window Fallacy



If I were king for a day the one book that would be mandatory reading for the 535 people I despise most would be Economics in One Lesson by Henry Hazlitt.  Sadly, I’m a libertarian.  I don’t force people to do things unless I’m defending myself.  Not even congress.

Hazlitt’s book, written in 1946, reads like it was written yesterday.  I have explained portions of the book to liberals and they have told me it’s just another right wing author trying to attack President Obama.  I usually get a confused blank stare when I explain that the book was published more than a decade before his birth.

Economics is One Lesson is an easy read based on an essay written by Frederic Bastiat in 1850 called “Ce qu’on voit et ce qu’on ne voit pas” or for people who share my ability with French  “What is Seen and What is Not Seen.”

The basic fallacy goes roughly like this:

A bakery shop owner has one of his windows broken out and now has to get it repaired.  It costs him $100.  People are standing around watching the repair and one person comments about how it’s actually good for the economy.  The person replacing the glass now has a job.  They will earn money.  The people who manufactured the window will earn money.  The people who distributed the window will earn money.  They will spend some of the money they earn.  The entire economy will be enriched by the broken window.  That’s what is seen and it’s all true.  But, what is not seen is never considered.  What is not seen is that the baker was planning on using that $100 to buy each of his children a pair of shoes.  The shoe manufacture would have earned money and on and on.  Now, instead, he has to replace the window and the old shoes will have to last a while longer.  So, what exists now and is seen is a window.  What is not seen is that had the window not been broken out in the first place a window and two pairs of shoes would have existed instead.

Economics is about the real goods and services that are available to us.  In the case of the broken window less is now available.  Hazlitt then goes on to cover many other parts of basic economics in terms any high school student can understand.  As libertarians we don’t force others to do things.  But, if you only read one book during your lifetime on economics I beg you to consider this one.

Economics in One Lesson Kindle E-Book

Free PDF copy of Economics in One Lesson