The Broken Window Fallacy

[@psikogeek]

Yes, the war put lots of people to work, but so did gulags.

[@iwill9131]

But in all actuality, the people having to leave the economy to go to war reduced the innovative and production potential within the economy as a whole.

[@geekcast1]

"Government is good at only one thing. It knows how to break your legs, hand you a crutch, and say, 'See if it weren't for the government, you couldn't walk.'" - Harry Browne

[@radornkeldam]

The definition of the welfare state.

[@God-T]

And then the cycle of Vengeance continues... lol if it ain't broke don't fix it.

[@Runner899]

"It's production that creates prosperity, not destruction" Another benefit to not have the broken glass window fallacy is that sometimes people or organizations have to borrow money to pay for damages, a perfect example is governments dealing with war. War causes great destruction and forces us to spend and ultimately borrow trillions of dollars, from paying defense contractors and building more ships ect to prepare and deal with the effects of the destruction of war. This great debt of trillions of dollars causes many problems in a society, it increases inflation since we have to print and borrow so much money, and causes our interests rate payments to increase since our principe is also increased, which will result in tax increases or less spending for government programs to deal with the higher debt payments. Ultimately destruction, a related part of the broken glass fallacy, destroys wealth.

[@ericray7173]

Didn’t world war 2 dig the US out of an economic slump?

[@StateExempt]

Wish the writers at Gawker saw this vid before penning posts that literally said riots stimulate local economies.

[@dangervich]

To think that this even has to be said.

[@sofia.eris.bauhaus]

it has to be said every time some moron promises to "create jobs".

[@isidoreaerys8745]

Cash doesn’t trickle down, it always Trickles up.

[@alitlweird]

I think this video is aimed at modern college graduates. Especially those who received degrees in economics.

[@ajjancosko7066]

Send this to Antifa

[@God-T]

We are not creating wealth we are creating the production, and so the cycle continues but for those who do understand that Cycle U can Reap the benefits, but that doesn't make it, okay it just makes our society dimwitted to the fact that we Keep Doing IT !! 😅 ........ Truly you're a generation.

[@ericd4401]

If I shot the guy who broke my window it would create business for the mortuary!

[@Menegoth]

The most important difference between "breaking the window" and leaving it intact, is that with the former, you can directly guide where that wealth goes.

[@krishnamurthym595]

That's wise

[@shadyparadox]

Paul Krugman supposedly has some award in economics, yet he still falls for the Broken Window fallacy. What an embarrassment.

[@Bamshi101]

Its a fucking youtube video, piss off lol

[@sld1776]

It's a Krugmann NYT article from September 14th, 2001.

[@ahmaddwikipradany2843]

That's why some people call him former economist. Because he even said "Broken window fallacy ceased to be a fallacy."

[@God-T]

We are not creating wealth we are creating the production, and so the cycle continues but for those who do understand that Cycle U can Reap the benefits, but that doesn't make it, okay it just makes our society dimwitted to the fact that we Keep Doing IT !! 😅 ........ Truly you're a generation.

[@mcbain434444]

I remember in my history textbook in grade 11, it asserted that destruction was good for the economy. If I had known what I know now I could have destroyed the teacher in an argument about this.

[@Nebulous0_o]

I once created two jobs by paying one guy to dig a hole and another guy to immediately fill it in

[@leonardonetagamer]

Average government construction job (hence why it takes years to make a single public bathroom and $1.4 million)

[@freeguy77]

But that is how the GDP is increased (and unemployment "lowered"), so it must be "helping" the economy grow! /sarc

[@sbenard1]

Bastiat would be proud! Great video! Thanks!

[@TomekSamcik69]

It's as simple as understanding that quality of life is the ultimate goal, economy growth is only a mean to reach this goal.

[@Tamer_108]

this is some pretty rudimentary common sense

[@ramkumarr1725]

Good point. Common sense is not so common. Voltaire

[@vuufke4327]

you could tell Keynes

[@bastiatscorner4854]

Excellent and very clear explanation of the fallacy! I am still amazed at the number of people who haven't managed to understand these simple facts.

[@johnoneal1234]

I think it's a major case of missing the point. You and I don't gain by it, but it's authors assuredly do, in a very major way. How does anyone forget the Nobel Prizes are funded by the largesse of Alfred Nobel, War Profiteer. All those millions paid out, year after year, from someone dead for many decades. Money is made, it's just not you making it. That's not unusual, it's a common feature of scams. As long as it's someone else's money being wasted, there are tremendous profit taking opportunities in massive deliberate waste such as China Joe has dedicated his Presidency to.

[@allintexaholdem]

This is one of those things. At first, you might think, "yeah, it's good. Pay the window maker" but then after you think a little, this should be common sense.

[@AquaticSoda]

This is so true; the idea that destruction generates resources is ridiculous. Money -is- spent, but it doesn't increase; it goes in a giant circle and just keeps changing hands, giving the -illusion- of wealth, but the not the reality of it.

[@mrbiocorp]

0:49 that's Henry Hazlitt's chapter 1 book, "Economics in One Lesson"

[@TheManiacalSatanist6]

Very good presentation. People insist that The Broken Window Fallacy is the most persistent economic fallacy, but actually, the notion that in the realm of Supply and Demand one is prior to the other is the most persistent economic fallacy. The notion that Demand is absolutely prior to Supply, i.e., that Supply is entirely dependent on Demand, is the central driving force behind the broken window.

[@黎安沛]

How does spending create wealth? Spending just moves money around. Only if you use the money to create new things does wealth get created.

[@fistosmohlatlole5639]

if more people purchase or spend money on my products, i will be forced to increase production to accommodate those consumers which means more people are going to be hired for production of those products, thus create wealth in general to the community.

[@Gigamokin]

When you spend you get something useful in return, when you pay to restore, in return you're just getting the thing you already had, which causes stagnation, maybe not for the other poeple involved but for yourself.

[@黎安沛]

Gigamokin Yes. I am not denying that. But all spending ever does is move money and wealth around.

[@fistosmohlatlole5639]

Gigamokin by circulation money around people tend to have more and more resources which is the improvement of the wealth and living standard, money and wealth does not mean the same thing(money is a contributor to wealth but not wealth)

[@fistosmohlatlole5639]

Gigamokin stagnation involves unemployment in general sense but then in this case employment is created by hiring the person who is going to fix the glass then with the help of the multiplier effect people who manufacture glasses, the people who will maintain and manufacture the machines and tools for the machines used in the process and the list goes on.

[@LibertyInOurTime]

Excellent presentation. Thanks Prof. Carden.

[@andrewanderson4555]

*1 viewer quickly throws a rock at his window* a few seconds after 1:07

[@nokomisjeff]

Great way of explaining one of the most important things Bastiat ever said.

[@jeffeveritt8260]

This same argument NEEDS to be used in conjunction with the wasting of private resources as well. Happy meal toys are a good example. So too are all consumer electronics, vehicles etc. that have high failure rates, break easily and have repair costs which far outstrip replacement costs. It is often said that the private sector works much, much more EFFICIENTLY than the public sector does. What is rarely taken into account is whether the private sector is doing this EFFECTIVELY or not. Spending public money on renewable resources like solar usually racks up a pretty large wage bill and produces very little power. The private sector can easily continue to burn coal, outputting lots of power at relatively low price, keeping wages down in the process but also extracting PROFIT from the equation as well. When the profits exceed the return on the added efficiency of allowing the private sector to control something, it becomes VASTLY better to enrich the lives of many workers AND the environment over allowing a small group of investors to buy golden toilet seats and private jets.

[@HettesKvek]

"electronics, vehicles etc. that have high failure rates, break easily and have repair costs which far outstrip replacement costs." Planned Obsolescence. The mediocre products sold to us are made intentionally mediocre. Much of the private sector does not care about offering the BEST products and services. It's #1 goal is always profit.

[@Deadwind002]

HettesKvek: Yeah but you're framing it incorrectly. You could make stuff that lasts, but not enough people are going to buy it. Not enough people are going to buy a car that last 200 years, or hold on to Happy Meals for longer than a few months. Profits come when you build a reputation and a good enough quality product. Profits over people is BS we are taught from government schooling. You cannot secure long term profit without people first. Profits over people can only be the case when you don't have to actually make a good enough product b/c you take people's money by force (taxation).

[@jeffeveritt8260]

John Doe Taxation is only the fee you pay back to society for choosing to be involved in it. The only reason you use money that has a tax obligation attached to it is because you choose to not be entirely self-sufficient. Since power structures (Religion and economic monopolies such as cartels and corporations) can rise up and oppress with no checks and balances in place, democracy became a "dictatorship of the majority", simply because without it, much harsher and much less altruistic "dictatorships of the sociopathic minority" will surely form, and democracy chooses a "lesser evil". The recent destruction of democracy through manipulation and purchasing of politics by the most powerful of the private sector simply shows us that smaller and disempowered government only leads to bigger banks and bigger lobbyists. Religious and economic power (theocracy and monarchy/aristocracy) have ruled and dictated for centuries throughout history, what makes anyone think that a free market which causes radical economic inequality and concretes another aristocracy (rentiers and investors, specifically, who are neither innovators nor risk-takers in any real sense) is going to be better than simply improving democracy? I would really like to see a proper explanation. The mind boggles. Forget about the fact that the market doesn't CARE about environmental destruction, as long as resources run out before breathable air does, the market will self-correct, right? Fuck.

[@Deadwind002]

Sorry bro, you can't demand explanations when your argument relies on sophistry: "Taxation is only the fee you pay back to society for choosing to be involved in it. The only reason you use money that has a tax obligation attached to it is because you choose to not be entirely self-sufficient." Taxation isn't an 'only' fee, it is many fees. I could say that 'the galaxy is the only thing you see when looking out a telescope' but that would be intellectually dishonest when discussing the relationship between stars. I do not pay a corporation to do anything; a corporation doesn't feel anything or do anything; it doesn't go to jail or pay fees, it is just a word that describes in plural what individuals do, just like society and government. I also do not pay taxes to society, I pay taxes to the state. Now you can say that the sate returns some of that money back to society, but even if it did return all of it, it would still be a fee paid to the state and not society. I don't agree with the state using the 'fees I choose to pay' to pay for BP's oil spill (limited liability). With sophistry, all sorts of immoral acts can be made to sound justified. When BP 'pays' for it's crimes, it sounds like the crime has been punished, but in reality, everyone responsible got away with it, since only the individual can commit or pay for a crime, not imaginary and conceptual words like 'corporation'. In reality, all 'BP paying for it's crimes' amounts to criminals getting away with property damage, the government looking like it solved a problem but actually just had 'society' pay for most of it' and any costs that 'BP' incurred will simply come out of money not earned either through stolen money anyway (subsidies, tax credits, etc.). And the state protected them from the consequences of their crimes. So when you use the words 'society' and 'government' you are not describing anything, you are hiding behind imaginary sock puppets and pretending they are real things. When I choose to involve myself with 'society', I am choosing specifically WHICH members of society I am engaging with, and they do not FORCE me to pay a fee just by happening to live near them. When I go to Starbucks I am choosing to buy their coffee and if I do not, they do not assault me and throw me in a cage. The opposite occurs with the government. So even if we utilize your sophistry sock puppets, society is not government. By using these concepts you get to pop smoke and sound like you make sense but really you do not. By your same logic, I can say this: "The bailouts are the only fee that government must pay for choosing to be involved in the market." Does that explain anything that is real? Does it justify anything? In case you forgot, up until this part, this was about correcting your dishonest argumentation, not voicing political disagreements. "Since power structures (Religion and economic monopolies such as cartels and corporations) can rise up and oppress with no checks and balances in place, democracy became a "dictatorship of the majority", simply because without it, much harsher and much less altruistic "dictatorships of the sociopathic minority" will surely form, and democracy chooses a "lesser evil". This is a false premise, another form of lying in a conversation. Your argument is that if we don't allow some people to steal from everyone and use violence to back it up then other groups of people will steal and use violence to back that up. That without monopoly of protection services, that we will get no protection services. No one is arguing against law and order, even if I were an anarchist (which I'm not), but against HOW we order society. Do we initiate force, or do we use the retaliatory use of force? There is a moral and immoral way to solve problems, and saying that 'you choose to be involved with society' doesn't explain anything nor justify stealing and violence. Essentially, your argument is that without a government, we'll have another government (if we go by what things actually are by their functions and not by their imaginary sock puppet names). Which brings me to my main point. If I could press a button that eliminated every tax, regulation or government on the planet, I wouldn't do it, b/c the conditions that created it are still in place. This is the essence of my point regarding your fear of religious institutions or corporate institutions coming up (essentially other governments) - that if the concept of the initiation of force (violence) being used to solve problems was rejected, there would be no vacuum and no institution that could ever reclaim it. Just as no institution could ever successfully bring back patriarchy or censorship. These things were partially legislated b/c there was enough people to support it to begin with. "I would really like to see a proper explanation. The mind boggles. Forget about the fact that the market doesn't CARE about environmental destruction, as long as resources run out before breathable air does, the market will self-correct, right?" Markets don't care about anything, this is another imaginary sock puppet. Individuals care, and through that concern products that are better for the environment will come out. In fact, with subsidies and legal personhood, the power that oil industries has in increased substantially, even more when you factor in regulations that keep the little guy from entering the market. "The recent destruction of democracy through manipulation and purchasing of politics by the most powerful of the private sector simply shows us that smaller and disempowered government only leads to bigger banks and bigger lobbyists." The question is, why do rich people bribe politicians? B/c the government through it's current regulatory nature, can alter the market. Through the good intentions of millions calling for 'government regulations for safety' you create a center of power that will attract the worst kind of people. You can't use a system of organized violence (initiation of force) to solve problems and expect it to be used by good people, it's never going to happen. If you want government, it must only be able to retaliate with force and to protect things that are naturally recognized - your life, your body and your choices. This means no regulations, but a protection of property rights (your body and life and justly acquired material possessions). When you make the initiation of force it's primary function however, you will leave it open to people who will abuse it. A government doesn't negate religious or corporate control over others, it allows it. It allows one group of people to use the club of government to bash the other group. Nothing is solved only perpetuated. So by citing 'corporate take over' of the government you are using results of the state to blame the free market capitalism. "Profits over people can only be the case when you don't have to actually make a good enough product b/c you take people's money by force (taxation). " If I don't want to pay the salaries of DEA agents, I can't. B/c I will either be assaulted, fined or killed if I refuse. These men get to come to my house, steal my marijuana (funded by stealing from me) then make a living (profit) off of that. This is called profit over people. But if I don't pay Starbucks, I simply move on with my life.

[@vitruviuspolio]

I had previously had no idea that there had been such an attempted refutation of Broken Windows Theory. Thanks for giving it its due.

[@digitalkov]

"As long as it ain't my window".... so the theory goes...

[@validationwarfare]

This guy has a clue. Glad to hear his contribution.

[@markovkin5222]

"How to fix the economy? DESTROY STUFFF!!!" ~Paul Krugman

[@stalechips7418]

Jean Baptiste, Emanuel, Zorg. It's nice to see you again father.

[@kylethorburn9134]

What if the glass-maker threw the rock :p ?

[@KamuelaFranco]

+Kyle Thorburn That's metaphorically what pro-labor groups do all the time when they lobby for laws that screw over everyone else to keep them employed in the exact way they have imagined for themselves.

[@JapanJohnny2012]

that's a famous british gag, from the goon show. a rock crashes through window, with note attached - "fred smith. window repairer". :)

[@JapanJohnny2012]

Kamuela Franco you're describing a world from thirty years ago - it's gone.

[@rob98000]

That's called capitalism

[@ramkumarr1725]

In India, they call it the wall eating the grass instead of the cows. I think it might be a moral hazard. As a kid, they taught us about a pot maker who is commisioned by the king to make an unbreakable pot. Once he makes the pot, he becomes jobless. If you believe in making yourself redundant at your job you should become like that pot maker. Or stop throwing stones at the glass you made. There is another option for the glassmaker who instead of breaking glasses can join the ever green field of politics. Politics is often called the jobless persons job in my country.

[@OgreMECH]

Yeah. It is fascinating to think about. He's also doing a lot of charity work with massive impact on the world that someone else might not have done. Lots of disasters had unexpected good outcomes. For example, the plague improved worker conditions when labor suddenly became a scarcity.

[@TheNade]

Kid with rock = Planned obsolescence or built-in obsolescence[1] in industrial design is a policy of planning or designing a product with a limited useful life, so it will become obsolete, that is, unfashionable or no longer functional after a certain period of time. This would make sense, but the kid with the rock was the glass shop owner the entire time.

[@ekklesiast]

There's no such thing as "planned obsolescence", it's an utter nonsense. There is planned time of life, which is dictated by consumer demand and by technological progress. People don't want to pay double for a product that lasts 20 years, when it will get useless in 5. And progress is what makes things obsolete, unless you still want to watch CRT TVs and use brick cellphones from 80s.

[@austinbyrd4164]

Only time planned obsolescence gets by mass consumer demand is when government intervenes. Like intellectual property. You can't legally pay someone to repair your own iphone. Apple has a government granted monopoly on that market. They can make their phone easier to break, then make people have to come to them for repairs. Charge them a ridiculous high fee.

[@supermonk3y07]

Another thing I wanted to add is that in life, unexpected things will just happen and we just have to do our best to prevent them from happening.

[@joecarmody5544]

Not always true . if you demolish slums and replace them with better housing you stimulate the ecnomy by revenue going to building firms and investment and wealthier people moving to that area that would never have been successful without the initial destruction.

[@Cloud_Seeker]

Joe Carmody That is a really stupid analogy. Is replacing something that is already broken destruction? If I remove a wooden board because its rotten with a new wooden board that isn't rotten destroying property? Renovating isn't the same as destroying, those people that live in the slums for sure should have renovated a long time ago if they had the money for it because their shit is already broken. Your analogy doesn't work because you are comparing apple and oranges, you are comparing stuff that is broken with stuff that isn't broken.

[@joecarmody5544]

Cloud Seeker Fair point !! But peoples perception of broken is divided

[@KamuelaFranco]

+djancak If there's an area that keeps getting destroyed by flooding, you'd think a stupid fucking government would stop incentivizing people to build there UNTIL there was a brilliant way to prevent this.

[@Radioswim]

Also you made my point for me as that is precisely the idea of a silver lining, even if it may be illusionary it is actually finding and harnessing a positive from a negative. The branch growing back IS in fact the silver lining, in that AT LEAST it will grow back instead of being completely lost. NO MATTER the reason the branch was cut off in the first place

[@Russ-nf9tv]

It's been 9 years and I still haven't seen a window "grow back."

[@OldRangeRat]

I wonder what relation the fat boy is to the Koch brothers? Hey, WWII put a lot of Americans to work and gave the America's a leg up on Europe and much of Asia for about 20 years. Rule of thumb #1 - Almost every simple rule has at least one exception.

[@Jurasskick]

So have you hired an army of kids to break all your windows so that you (and the rest of us) can reap all the economic benefit? Carden is absolutely correct in this video. You also may want to do some economic research about what caused the economic boom after WWII. It was not the war effort that created decades of prosperity, nor was it an after effect of the New Deal. It was the massive reductions in government spending after the war ended. The reduced burden on the taxpayers is what we have to thank for the post war boom. Despite the fact that it was worth it, the war effort created a lot of death and debt.

[@OldRangeRat]

Jurasskick blah.. .blah... blah

[@Jurasskick]

OldRangeRat The response of a person who just lost an argument.

[@OldRangeRat]

Jurasskick OMGYASS

[@kevenharvey9711]

The U.S. profited from the war before they joined it late.

[@Sicovit1984]

Just to be clear. I agree with the video. My point was that Wars help create jobs and WW2 pulled us out of the depression and was a period of great economic growth, however, the national debt increased from 48 billion to 268 billion, ultimately leading to inflation. During the depression, new jobs weren't being created, because people couldn't afford to buy things, resulting in a domino effect of job losses. War was the engine of job creation in a time where no other method existed.

[@hirolau]

If you think this should be obvious to anyone then i will say: Yes it is! No economist EVER had thought about these questions without keeping the alternative cost (or in this case the broken window) in mind. Many factors play in other than raw material: distribution of wealth, current demand, investment rate and so on. This video is good lesson in economic thinking, but an oversimplification of reality.

[@null-00x2]

Wow, great video! I was looking for a nice explanation, but your visuals really help explain it even better. I'm trying to convince my countrymen (I'm in America, the country that keeps declaring war on everything :| ) that starting another war with Iran will *not* end the depression. Hopefully, this will help convince them. I do not want to see another decade of war and wasted resources which could be used to research fusion power, faster computers, and the like.

[@UmTheMuse]

Maintaining something is one thing. Cheering because we have to re-do something needlessly is another thing altogether. Repairing something is a waste of the original effort whether or not it is necessary. And even if it makes the window repair business stronger, that doesn't mean that society as a whole is necessarily any better off. One thing that he did leave out is that you could replace the window with a better one, which can improve society's well-being somewhat.

[@Pedrg93]

I agree, altough one thing that needs to be taken into consideration is that destruction changes the needs and structure of the domino chain. As mentioned before, the evolution of technology in world war ii, along with other social reforms and events are not the same. Systems get replaced with others and it gets increasingly hard to judge which path had better results afterwards. This works wonders in the small scale but becomes a little fuzzier on the larger scale. The initial loss IS relevant.

[@Pyrrhic.]

It really depends on the situation... Well usually after a natural disaster, war, terrorist attacks are funded through borrowed money. So technically it does create more jobs but the trade off is more debt. If a production center was wiped out, that would affect output & would probably yield negative growth. If a residential area is destroyed, that would probably yield to positive growth in the future when that residential area starts rebuilding.

[@NerdyLiberal]

This is a good video. To everyone hating on Paul Krugman, I would like to point out that keeping the use of the money the same, the broken window is bad for the economy. However, if the person would have kept the money in cash out of fear that the economy is bad, forcing them to make a purchase is better than nothing.

[@andreworam2844]

The higher minimum wage argument is a broken window fallacy. The argument is that employees with more money spend more. But the problem is, you have to take that money away businesses who would have spent it elsewhere.

[@johnadan3509]

Well said “production create prosperity not destruction” when we stop production or create everything stops......

[@phoenixamaranth]

But did you think about that window production demand is created by the destruction of existing windows?...

[@beauxq]

"Something of value" is subjective. If there is a demand for holes, then the person digging holes is creating something of value. If there is a demand for lack of holes, then the person filling the holes is creating something of value. This is why manufactured demand is such a big part of the monetary economy.

[@stefanRastocky]

what if the money used to repair the window would otherwise sit under the owner's mattress as a saving? He would still buy his suit with other money and only use the saving to repair the window, in which case the broken window would actually increase the mobility of the money which would otherwise be useless and unused as a saving (provided he wouldn't have invested it)

[@FletchforFreedom]

Other works I recommend are Jim Powell's "FDR's Folly" (a good economic analysis) and Amity Shlae's "The Forgotten Man" (more of an historical perspective). As for what I'm trying to achieve: I'm an economic historian who often has to put these discussions in the context of the opposing views. Sometimes the discussions here are valuable ... and sometimes I get hit with "Either that or go into space" as if it were an argument.

[@jackpotjonn]

I've never heard or read any economist say that destructive activity was good for the economy. I read Paul Krugman's article about an alien invasion. The point he was trying to make was that if the country can muster resources to fight an invasion why can't it do the same for an emergency such as unemployment. The problem is that we don't recognize unemployment as an emergency.

[@beauxq]

You said "The point to 'a job' is to produce a good or service that benefits society as a whole." But "benefit" is subjective, so there's no way you could exclude anything like "digging up holes just to then fill them". And if you look at the current situation, a job just for the sake of a job is exactly what people are calling for. An unemployed person doesn't care much what he does as long as he gets paid. A job just for the sake of a job is exactly what people would see as beneficial.

[@classiclibertarian]

Recession occurs when there is a lack of built up capital necessary for investment in other projects. The lack of built up capital can be caused by: destruction of property, increased state spending, fixed [low] interest rates, and other government intervention into the economy that forces people to allocate their savings to where the state wants them. The broken window is what causes the recession, not what cures it.

[@economicfreedom8591]

Look up "Hauser's Law." It's an empirical law showing that REGARDLESS of the height of tax rates, tax revenues flowing to gov't are always about 20% of GDP. The 20% "slice" of GDP doesn't change with tax rates. What does change with tax rates is the overall size of GDP (the "economic pie"). When tax rates rise, GDP falls (and vice-versa). So if you want to increase tax revenues to gov't, lower tax rates on everyone so that GDP will increase; the 20% slice to gov't will then be larger.

[@DaBearsManiac]

Not true, i myself worked as an Industrial Engineer (intern) for a company that had private contracts with Boeing and Lockheed Martin. We produced materials that Lockheed or Boeing needed to provide for the government. It was defense projects, but those contracts provided countless (invisible hand) dollars to be passed between everyone from the janitor of our building, to our regional manager. So yes, military defense initiatives do help create growth in the economy.

[@validationwarfare]

I just watched a bunch of videos from this KZbin channel and if I see that they have even more intuitive points in their videos, then I'll likely subscribe.

[@Sicovit1984]

Yes, but the problems I stated in the previous comment are a market phenomenon (planned obsolescence, unplanned obsolescence, cost efficiency, cyclical consumption). One of the main problems is the need to feed the Cyclical consumption mechanism. We have to keep buying things non stop in order to keep the system going no matter what monetary structure we have implemented. market systems require ownership, which is an extremely wasteful concept. We don't own the Earth, we have to share it.

[@ThaigerDon]

nice ad... would be great if this one aired on a hurricane sandy related video since the broken window argument was raised as a response to the damaged property caused by the hurricane.

[@Martial-Mat]

The company will likely be run by a board that is answerable to the shareholders. Every shareholder has a voice, but in practice, only those with a large percentage of shares get to moderate the company's actions. In theory, the board can (and sometimes does) do whatever it likes, and answer for it later, but contentious actions will usually be brought before the shareholders to vote on. Most companies will (I think) have a charter that limits what it can do without a vote.

[@Scripterrific]

I agree. "A job just for the sake of a job is exactly what people would see as beneficial." The individual would of course see this as a benefit, but I don't think the economy as a whole would benefit from a bunch of useless work. This is the distinction here, and not making this distinction clear is the source or the confusion within this conversation.

[@CognitiveImbias]

Nice production quality on the video, but it actually seems to make the broken window fallacy harder to understand than it has to be. Probably could have been cut down to about half the length too.

[@stanleyjforrest]

That's a good question. Let's follow the second example Carden gives of alternative spending: the window owner invests the money in a bank. The bank might lend those funds to a homebuilder, who creates business for the glazier (an old-fashioned word for "window guy") by building a house that needs windows put in. There are more convoluted ways to reach the same end, through more intermediary transactions, but I think this is substantially the answer.

[@ericray7173]

This is assuming that the window owner won’t just hoard his money.

[@stanleyjforrest]

@@ericray7173 Which is exactly what we see today, when any kind of profit - whether from new business, cost-cutting, or gov’t bailout - is directed into stock buybacks to drive up share price, instead of plowing it back into the firm’s core production function. That’s how you get one of the most reputable aircraft makers in the world shipping planes with unbalanced engines, malfunctioning avionics, and detachable doors & wheels.

[@cptcurk192]

This video is more than 11 years old and it seems even more important to get this message out now in 2023. It’d probably get cancelled if it were to be released on main stream media these days.

[@tchoco]

The problem with the broken glass fallacy is that it assumes everyone cares about the net increase of the whole world. It IS very possible to have a net decrease or stagnation of wealth of the world but a net increase for 1 party through destruction and war. The windowmaker for sure can have an absolute increase in wealth. If we look at the windowmaker as 1 country and the shopkeeper with the broken window as another country, for sure we can say that for the windowmaker, desctruction can lead to a net increase in wealth. Individual economies can profit from destruction done to other economies.

[@calder-ty]

Not really, because of trade it is better for everyone in the world if people are focused on Production, rather than spending their time and resources destroying things.

[@tchoco]

Tyler Calder You are repeating my point. I am saying that I agree that the broken window fallacy can be applied to the whole world or to all the parties involved in a war together. But it IS possible for 1 party in a war to have a net increase of wealth through destruction and war. But one can't blindly say that for an individual economy of 1 country, the broken window fallacy counts, simply because spoils of way/war payments are left out of the equation. The US war with Mexico had the result that for the US individually, for sure there was a net gain in wealth. The territory expanded enormously and that resulted in an expansion of wealth and ultimately population. Another example are the Spanish conquests of the Inca's which led to an amazing increase of wealth for the Spanish.

[@calder-ty]

I understand what you mean, The way i see the increase in wealth from conquest and spoils of war would be a transfer of wealth from one nation to another. No wealth was created, it was transferred from one party to the other. So yes your right that war could result in a gain of wealth, but it amounts to stealing property and not necessarily destroying it.

[@tchoco]

Tyler Calder Yes excactly. It's wealth transfer from 1 nation to another. I agree no wealth was created. Its indeed like stealing property/extortion and destruction and war is used to be able to do it. Hence destruction and war and wasting resources on war material can lead indirectly lead to more wealth for an individual economy. They can give leverage. Having a lot of war material is also not automatically a waste. The broken glass theory will also state that the spending on war material could have been used to spend on other things. But again: the war material can give a stronger position in negotiations(extortion) concerning things like borders or trade or payments and could have an increase of net wealth that is higher than the alternative things on which the money of the war material could have been spent on. For the world as a whole, I fully agree war spending and destruction are wastefull and lead to a stagnation/net decrease of wealth.(excluding perhaps the long term effect of technology byproducts of war for which normally there would have been no impulse to start researching). The problem is that we don't care for the increase of wealth of the world as a whole, but nations care about themselves. Even if a war leads to a net decrease or stagnation of wealth for the world as a whole, if a nation itself can increase its own net wealth, it will often choose to go to war, and for that nation individually we can't say war always is worse for its economy than no war. Thats why I was explaining in the first post that the problem with the broken glass fallacy is that it talks about the net increase of everyone combined and assumes people care for everyone combined. In a war, one party usually doesnt care much about the party they are at war with. So in his example where when there is a war, someone will come and says that its good for the economy , the speaker says that person is wrong. But the speaker is wrong to assume that that person is talking about the economy of the whole world. Of course when someone in a country says that war is good for the economy , he of course is referring to the economy of his own country and not to the economy of the whole world and he is not necesarrily wrong like the speaker in the video is suggesting.

[@calder-ty]

You like Economics much? I rather enjoyed the good discussion with you, it would be fun to talk it more with others.

[@gimmyyyy]

"no one can know this to manage it." This makes a whole lot more sense than what you said prior. The explanation in the video is extremist and to draw a parallel to your "the threat of war... can lead to production" it would be like you saying that we should have people live in constant fear so long as no real war breaks out because this is productive. Are you really advocating fear mongering for the sake of prosperity? I advocate personal freedom over herding people to prosper like sheep.

[@gimmyyyy]

Yes, it would seem that we agree. Keep in mind that economics is complex because it involves human behavior and other randomness.The fact is that in most places people do not have true ownership of property. Property taxes require that people work to pay the government their rent. Though I'm not for destroying property,its destruction could lead to productivity, it all depends on idle workers and idle money. But I'm not saying that's what should happen, just that it could under circumstance.

[@promontorium]

Telling someone to just "get over it" when referring to something correctable and preventable is rather obtuse. We are not merely victims of circumstance, we can make preparations and right courses.

[@sirellyn]

The omniscient view I was referring to was that a group of ppl know "enough" about a situation to effect better decisions than any other individuals. To actually KNOW this is true, you would have to have omniscient knowledge. (Knowing the final result of both choices) I'm saying that is an act of hubris. The act of humility would be to take a step back, conveying you do not know the best result and this allow events to take their course. Don't mistake that for inaction in all things.

[@dovahkiin516]

If a business is not spending it's profit, then "broken Window" would create economic growth, because the company is now forced to spend money that they were not going to spend. A lot of companies do this to avoid taxes. If you keep your profits in the company and not pull it out then it is un-tax. If you pull out your profits then it is taxable. So, it really comes down to whether or not the company has profits and was not spending it. If they do not meet those two requirements then he is right

[@Greg_Ulmer]

Yeah, I agree. I still enjoy these videos, but I wish I could trust them to not be biased.

[@7deadlyvirtues]

Destruction leads to change, which is why there is no avoiding it.

[@Thicite]

well I'd argue it wasn't a waste in all aspects, countries like Germany and France boomed because of a modernisation of their industry and it causing a 30 year boom really just demonstrates how anachronistic of a concept the market is, I can remember seeing a graph demonstrating the 'effectiveness' of healthcare in the USA due to the amount spent, when all it was was the multiplier effect as people paid full prices for the goods in the US :p

[@FletchforFreedom]

It isn't a zero-sum game model and unemployment levels are COMPLETELY IRRELEVANT to the issue. Whether or not people are unemployed has NO bearing whatsoever on the fact that the gov't must take those resources from the private sector. It is those resources that create employment at market wages. Your pretense that government "created" jobs are filled by unemployed people without loss of private employment is contrary both economics and history.

[@harmonymelodypress]

I saw this entire video as an advertisement on CharlieIsSoCoolLike. Loved it. Thanks for advertising and making a great video, I automatically clicked on it and am now subscribed to you. I hope I can see more interesting videos like this in the future.

[@CharlesGervasi]

Broken windows can "help" if means of production are going unused. Factories won't hire until more people buy products, and people won't buy products until they get jobs. Increased gov't borrowing money for a *short period* can fix this. When gov't starts spending, though, it's almost impossible to stop, unless it's for something like a war or addressing some disaster. The emergency causes a *brief* period of borrowing, which primes the pump, putting unused production capacity back to work.

[@Martial-Mat]

Money is invested BY BANKS on the gamble that not all customers will want the money back at the same time. However, once a COMPANY sells you a share, it has no obligation to buy that share back. If you want to sell the share, you essentially sell it to someone else who wants to buy it. If confidence in a company falls, and shares get sold off by shareholders, the share value falls, so the price the sellers get is less. I don't THINK that the company is ever buying back its own shares.

[@classiclibertarian]

Spending prolonged the depression. The reason the great depression lasted so long was because the government was spending nearly every reserve of capital that was available in the economy, thus, no private investment (recovery) occurred until a drastic cut to government spending. The economy 2000-2008 was undergoing a boom in which low interest rates held down by the fed, combined with bailout legislation insured by fannie mae and freddie mac led an unsustainable boom in housing.

[@jarrbear05]

@nelsonrn Assuming you are correct, why should the government not pass a law ordering buildings to be destroyed every 5 years? Money would then be pumped in to the economy, stimulating demand and increasing prosperity. Or at the very least, make it illegal for people to save a single dime of their income. Think of all the jobs! It never ceases to amaze me how Kenyesians belief these overlords completely disconnected from the economic events know how to spend people's money better than they.

[@vonGleichenT]

very nice. Keep producing !

[@Gollsodia]

PRODUCTION! Yessss.....That was beautiful.

[@FletchforFreedom]

The concept of "creative destruction" is an entirely different concept related entirely to VALUE not MONEY. It involves the constant reallocation of resources (again, value not money) from less productive avenues to more productive avenues to the benefit of the economy. This doesn't change the fact that there are NO "mechanisms" at play with regard to the overall impact of monetary expansion. The only ones that apply have to do with who wins and who loses (in what IS a zero-sum proposition).

[@FletchforFreedom]

Paul Krugman REPEATEDLY makes the broken window fallacy, most notably when he suggested faking an alien invasion (moving resources to deal with the problem); when he stated (absurdly), "And the broken windows fallacy ceases to be a fallacy"; when he suggested that forced closure of coal-fired electric generating plants would have a “positive effect” on the economy; and when he said "we would see a bigger boost in spending and hence economic growth if the [2011] earthquake had done more damage."

[@edwaggonersr.7446]

What is unbelievable is that so many fail to understand Bastiat. Nothing could be simpler that his essay "The Broken Window". Everyone interested in freedom should read his book "The Law".

[@Sicovit1984]

Nobody controls distribution. Demand controls distribution and the data gathered from resource inventory. When there is a shortage, we share. There is no governmental control in an RBE. Decision making is assigned to machines as well as labor. So basically, labor is done by machine automation. That's how we feed the world for free. There's not hierarchy in an RBE. Just volunteers that contribute to society as a whole.

[@FletchforFreedom]

I apologize for not clarifying that I was speaking in terms of GDP and, you are right, it wouldn't mean crap if GDP fell due to recession by an amount that would account for the increased percentage, all other things being equal, but, in fact, inflation adjusted GDP in the UK ROSE 5% over the period so my point remains entirely valid. Since government spending doesn't make anything more robust and history demonstrates that cutting budgets DOES cure it (see 1946) your analogy fails epically.

[@rastaman24211]

As an accountant, I have to point out that your debt is someone else`s debit, not credit.

[@rancheroman3402]

Just stumbled on this video, loved it.

[@RBurns80]

I'm not an expert on the plague by any means. But the plague didn't improve worker conditions because of a sudden labor shortage. Though you can argue that the plague created a labor shortage, which forced producers to be more efficient. This required innovation in production, such as improvements to the plow to reduce need for labor. And which ultimately led to the industrial revolution... For decades after the plague, wages stagnated.

[@economicfreedom8591]

When discussing the Broken Window Fallacy, I always stress the *potential* jobs that *could have* appeared, rather than existing jobs that were destroyed because they couldn't afford to comply with the tax policy, because on a free market, LOTS of things can destroy existing jobs that are simply natural occurrences indicating economic progress, e.g., a change in consumer tastes; new technology (jobs manufacturing typewriters were destroyed by the advent of the PC); cheap foreign imports; etc.

[@freeguy77]

Cheap(er) foreign imports are GOOD things! No one country is self-sufficient in ALL areas of producing EVERYTHING the people want. Therefore, if a foreign country manufacturer is offering quality goods (good enough to compete with the domestic), it would be in EVERYONE's interest to buy the lower-cost item, then you have LEFTOVER money to buy MORE things that help OTHER manufacturers. It's really a win-win all around. Only the bloated, inefficient domestic producers are forced to either downsize, cut THEIR too-high prices to compete, or go out of business, but the overall savings in the economy will produce MORE jobs and better production for everyone in the long run! And this is another big fallacy in the name-calling of, "cheap foreign imports." In the 1970s, U.S. automakers were big, but inefficient and not keeping up with foreign makers (ex, Toyota, Honda), so when the oil prices soared (in response to the 'dollar' depreciation from Federal Reserve inflating the paper "money"), Toyotas and Hondas became more in-demand. U.S. automakers had to respond, or lose money! Consumers determine production, and anything prohibiting or impeding that natural law of economics, results in LESS prosperity, not more! The 1962 Trade Expansion Act ("Kennedy Round" of GATT) lowered most foreign import taxes that expanded consumer choices, and making Americans wealthier by forcing the domestic manufacturers to be more competitive, instead of relying on their government allies to impose a tax on the foreign imports to be more expensive--that make Americans poorer.

[@MrLewisMovies]

What are some of those safeguards? And a common trend before depressions are economic booms; which are in no way a general fear of investment.

[@MrLewisMovies]

I know about glass steagall, but I want to hear how they caused the economic busts. What safeguards in glass-steagall and the other you mentioned were removed that caused an economic bust? And if these safeguards are so important, why didn't the market provide them?

[@UmTheMuse]

I was exaggerating. What I'm saying is that you're mistaking work/money with progress. Let me explain this differently. If you're right, then a window repairman should occasionally break his own window. By doing so, he has created more work for himself. Does that make sense? The difference between my example above and the original is that the person suffering is different from the one who is compensated.

[@david52875]

"Also, resource management wouldn't be determined by "an algorithm," it would be a complex system of integrated systems." This is what I'm talking about. You ask a RBE believer how we know how to distribute resources, and they appeal to technology and say we will create some vague "system of systems" that will solve all of our problems.

[@God-T]

We are not creating wealth we are creating the production, and so the cycle continues but for those who do understand that Cycle U can Reap the benefits, but that doesn't make it good it just makes our society dimwitted to the fact that we Keep Doing IT !! 😅 ........ Truly you're a generation.

[@economicfreedom8591]

Both. But a tax on business, whether steady or increasing, is viewed by that business as a COST which it passes on to its customers. Businesses, in effect, COLLECT taxes from consumers, but they do not, literally, "pay" taxes. It falls on the customers (higher prices/reduced service) and/or the employees (reduced benefits, e.g.,). However, there's an internal additional cost to a business in terms of required paperwork and bureaucracy which, for smaller businesses, can be destructive.

[@xxdudeyydude5106]

Everything is in balance. Where there is a gain, there is also a loss.

[@noway63244]

I've often wondered... Is it more correct to describe it as "destroyed jobs" or as "jobs that were prevented from coming into existence?" My first thought is that a tax increase would produce more of the former while keeping taxes as-is would produce more of the later. Is that a good theory or is there some better explanation for which is more correct?

[@ProgressiveLiberty]

This metaphor is over used to describe the multiplier effect, which in essence creates growth during times when even meager growth might not occur--when markets cease to function properly.

[@david52875]

"Obviously we're not managing resources efficiently." I was saying that the price mechanism was a necessary condition for managing resources, not a sufficient condition. We don't manage resources efficiently largely in part by the Federal Reserve's manipulation of interest rates, crony capitalism in government and other things.

[@maggot1111666]

That makes sense. I was trying to apply this to deficit spending in a paper i'm writing. If the gov takes 100 bucks to build a road, or the guy just builds the road himself, is anything lost there? That's where i ran into the problem, because i don't think there is a difference in that scenario.

[@UmTheMuse]

If I understand you correctly, your point is that, given that the window is broken, society is better off if we replace it. Agreed. The "silver lining" is that there are ways of replacing, maintaining, and/or fixing things that don't work though. My point is that there is no silver lining in the act of destruction itself. Even though the window maker may be made better off, the merchant isn't and society as a whole isn't.

[@FletchforFreedom]

It is NEITHER a demand problem or a supply problem. the problem is that government spending and credit/money supply expansion has resulted in investment in the wrong thing and the wrong stages of consumption so "boosting demand" (as if that were actually what government spending could ever accomplish) merely serves to MAKE THINGS WORSE by creating more things not market driven. The only solution is to let these malinvestments clear and allow the market to re-equilibrate.

[@ericray7173]

I’ve never thought about this before, but I don’t agree with the point that this is always a fallacy. In the case of a single broken window, wealth has been forcibly taken from the shop owner and handed down the line. It’s not right, but it’s still true.