The Broken Window Fallacy

The Broken Window Fallacy
and the Law of Unintended Consequences

The Broken Window Fallacy, also known as the Parable of the Broken Window, was created by the French political economist Frédéric Bastiat (1801-1850) in his essay
Ce qu'on voit et ce qu'on ne voit pas
(That Which Is Seen and That Which Is Unseen) to reveal the undesirable hidden costs associated with the seeming benefits as a result of destroying the properties of others. This concept was also further developed by the Austrian economist Henry Hazlitt (1894–1993) in his book, Economics in One Lesson (1946).

While the labeling similarity of the concepts cannot easily escape the inquisitive minds, Bastiat's Broken Window Fallacy must not be confused with the Broken Window Theory developed by James Wilson and George Kelling as popularized in Malcolm Gladwell's Tipping Point (2007).

How does this fallacy work?

A man throws a stone into the window of a house, breaking the glass and destroying some properties. Furious, the owner runs after the man but he is long gone. The neighbors gather in sympathy to look into the incident of vandalism and after a while offer some consolation by saying that glaziers (glass cutters or glass makers) are there to solve the owner's problem. Without the man breaking the window, glaziers would be out of business. Breaking windows, or any vandalism for that matter, serves some good purpose of creating employment for repairs and reconstruction. The emerging justification somehow overlooks the hidden costs that the owner has to incur (the owner could have used his money to buy food, rather than to spend for window repair). This is the Broken Window Fallacy based on Hazlitt's original essay in his book.

The Broken Window Fallacy is also related to the Law of Unintended Consequences since both expose the wrong notion of privileging the beneficial outcomes by hiding unintended costs. Both concepts involve the incomplete accounting for the consequences of an action. If the hidden costs are accounted for, the claim for the beneficial outcomes will be effectively challenged.

Unintended consequences are latent outcomes. They may or may not be limited to the results originally intended in a particular situation. The unintended results may be foreseen or unforeseen, or planned or unplanned, but they should be the logical or likely results of the action. There are three types of unintended consequences: (1) the positive unexpected benefit, usually referred to as serendipity or a windfall; (2) the negative or perverse effect, that may be contrary to what was originally intended; and (3) the potential source of problems, such as described by Murphy's Law. Generally, the Broken Window Fallacy intimately binds with the negative or perverse unintended consequences.

Applying the Broken Window Fallacy, some arguments may be raised:
  1. Waging war that makes good business in the mass production of weapons and equipment, not to mention the men who are conscripted as soldiers. But what happens to the cost of war imposed upon humans?
  2. Is there such a thing as waging war in the name of peace? Or religion? Or sovereignty? Or territory? Especially the all-out war? Similarly, the concept of a just war should be thought out several times.
  3. And we need to really demystify the so called collateral damage in every human undertaking! Collateral damage disregards the cost to justify some acts; it is a form of hidden cost.
  4. Putting up a profiting business, despite the cost of dislocation among the residents. This includes the cost of environmental destruction and mitigation, as well as the cost of human displacement.
  5. Greasing the money to lubricate the bureaucratic engine in order to speed up the transactions. But what happens to the long-term distortion and destruction of the bureaucracy? And undermining the common good must have some cost.
  6. Allowing political accommodation and compromise as quid pro quo tactics. But where do we assert our principles and standards?
  7. Stocking on goods because they sell on big discounts, but even if we do not need them?
  8. Acquisition of credit cards and even club membership perks without knowing the hidden financial charges.
INSIGHTS: The Broken Window Fallacy is a strong argument against trivializing hidden costs thus, yielding to some artificial or fleeting beneficial outcomes. Broken Window Fallacy simply calls us towards a kind of benefit-cost analysis that is more honest and realistic in accounting for the hidden costs.


Parable of the Broken Window Fallacy at http://en.wikipedia.org/wiki/Parable_of_the_broken_window

The Broken Window at http://freedomkeys.com/window.htm

The Law of Unintended Consequences at http://en.wikipedia.org/wiki/Unintended_consequences

That Which is Seen and That Which is Not Seen at http://bastiat.org/en/twisatwins.html