Broken window fallacy, The “Broken Window Fallacy” goes as

Broken window fallacy

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Reference no: EM131094465

The “Broken Window Fallacy” goes as follows. A baker comes to his shop one morning and discovers someone has thrown a rock through his window. It will cost $300 to fix, and while he is bemoaning this someone says “I know it is hard for you, but socially it is okay. Because the window is broken the glazier will be employed — after all how could a glazier make a living if windows did not get broken? But it does not stop there. The glazier will take the $300 and he will spend it. This will be income for someone else. And on and on it goes. The broken window produces employment and wealth for everyone.” This must be false, otherwise to spur economic growth we’d just need to go around and break windows, cars, and anything else we could get our hands on. Using the concept of opportunity cost, explain why this is a fallacy.

Reference no: EM131094465

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