44. What is The Broken Window Fallacy

Every time an individual takes an action, there are consequences. Sometimes we can see the consequences of our actions immediately, like if we don’t tie our shoe and then trip and fall down. Other times, it’s more difficult to see the consequences of the things we do. Today we discuss what Frédéric Bastiat had to say about this phenomenon and how it leads many people astray.

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Books/Essays:

• That Which Is Seen, And That Which Is Not Seen

Terms:

• Fallacy: A bad argument people make to justify their end goals.

Here is the transcript of our conversation:

Brittany: Hi Connor.

Connor: Hey Brittany.

Brittany: So in the past, we’ve talked about a guy named Frederic Bastiat and a few times actually, because The Tuttle Twins have a book where they learn about the law, and that is about one of Bastiat’s famous essays, The Law. Now, today I wanna talk about another one of his essays, it’s called That Which is Seen and That Which is Not Seen. So Connor, let me start by asking you if your son or daughter broke your living room window. Generally speaking, would you say this is a good or a bad thing?

Connor: I would definitely say that’s not a good thing, It’s a bad thing.

Brittany: Right. Okay. Well, some people, economists, specifically people who study the economy sometimes like us, believe that having a broken window is not only a good thing, but it’s actually necessary from time to time. So what do you think about that?

Connor: That seems so, okay, so they’re playing baseball outside. They throw a ball in the window, obviously, they’re gonna feel bad about it. They know there’s gonna be like a consequence, they’re gonna have to maybe pay for it or something. I’m gonna be upset cuz now I’ve gotta deal with it. We’ve gotta clean up the glass. I’ve gotta get someone to come to fix it cuz I don’t know how to fix windows, and

Brittany: Forgot that you don’t know how to

Connor: and that’s just our miraculous pencil book. You might also say no one knows how to make windows. It requires so many people. But okay, so I’m gonna say it’s bad. So why? Yeah, that’s a good question. Why would some people argue that that type of action, breaking a window could be a good thing?

Brittany: All right, well let’s talk about what we can see immediately. So if there’s something that becomes a parent is if you have a broken window, what are you gonna need to do? You have to replace it, right? So somebody has to come, What is it? How do you say the word? Is it a glazier? Is it glaze?

Connor: A Glazier? That was close. I was just gonna say, we just put some duct tape on it and call it a day

Brittany: Hardboard cardboard box, duct tape. Probably not. If let’s say this was a storefront window and you wanted people to come into your store or even your house, I feel like maybe your wife is not gonna love you having duct tape on the windows, but okay, so you’re gonna have to get a new window. So some people would say, Well this is great because now what is it? Glazier? How do you say the word again?

Connor: I don’t, I think it’s glazier. We’ll tell her window. The window maker. Yeah,

Brittany: The window maker now has a new job. So a lot of people would say, this is great because yeah, sure you don’t have a window anymore, but oh my goodness, this window maker just got a job. And if he can take that money and he can spend it, people would call this stimulating the economy is what we hear. We hear people say, That’s great. Now more people will have the opportunity to make money, but why do you think this is wrong? What do you think about this? There are some problems here.

Connor: Yeah, there are a lot of problems, right? Because if you’re looking at the window maker, we’ll call him, Yes, he’s gonna make money, but I’m gonna have to pay for it. Let’s say as the parent, we’re using my kids as an analogy here, so I’m gonna have to pay for it. Even if I broke something, if I broke a window, I’d have to be paying for it. So now I have less money to spend on something else. So my money had to go to fix the window for the business or for my house. So that’s good for the window maker. He benefits because he got a job that he otherwise wouldn’t have had. So if you’re only looking narrowly looking at one person or one group of people, you might say, Oh look, breaking windows is great cuz it creates jobs for the window makers.

But then maybe I was gonna spend that money on a little kid’s lemonade stand that day, and now they don’t get money, which means they don’t have money to go on Amazon and buy their toy, which means the toy company doesn’t get money. And so I was kind of forced into spending some money on the window for the window maker, but there are other things that I would’ve done with that money that I wanted to do instead. So in the case of the example I just gave, we still would’ve had, had the window not been broken, then we would’ve had a window still, and then I would’ve also had lemonade, and then that kid would’ve had a toy and then so on and so forth. And so I think that’s the problem is that it would be silly to focus just on, Oh hey, look, it benefits the window maker when there’s a whole lot of other things to think about.

Brittany: And it also kind of brings up the point, we talked about it a little bit in the beginning is there are some consequences that are easy to see. You can see that a window maker is going to get money, that’s great, we’re really excited about that. But maybe what we don’t think about is what you mentioned, the unseen is what Frederic Bastiat called that. So the unseen are all these consequences like you said, all the other people, it’s hurting. So I think that’s really interesting because today a lot of people, not just economists, I mentioned economists earlier, but not just economists. A lot of people think, okay, so if we wanna stimulate the economy if we wanna get the economy going again, it’s okay to break windows. And I’m saying that with air quotes because it’s not always breaking windows, It’s whatever it is to stimulate the economy, but they’re not seeing the big picture. They’re not seeing everything that’s going on. So what we call that is the broken window fallacy. That’s what that whole principle of this people, how silly it is that people think that if we go around breaking windows or breaking things or stimulating the economy, that’s actually gonna help us. But we don’t see all the consequences.

Connor: And a fallacy, let’s define that word. So a fallacy is it’s a bad way of thinking. It’s an incorrect argument trying to say something that’s not really true. So there are a number of different fallacies or these bad arguments. And so the broken window fallacy is one of them. It’s just one of these bad ways of making an argument or a point. And in this case, it’s nicknamed after the broken window because of this example that we’re talking about where it’s very a simple example to help people understand that, okay, well if we break a window and now we’re forced to spend money to benefit the window maker, sure it helps him. And a lot of people be like, Hey look, this is great. Yeah, as you said, Brittany, we’re stimulating the economy. We’re creating jobs for window makers or for whatever. But society would’ve been a lot better off without the broken window because as I said, you’d still have a window.

Plus that money would’ve gone to some other pursuit. So there would be more wealth, there would be more things, and there would be more stuff for people to enjoy rather than forcing them to replace something that they already had. I remember Britney, so I grew up in San Diego and shortly after I read Frederic Bastiat’s essay, I was blown away. How old were you, you when you were Oh, I was in my, I wanna say I was in my early twenties. Might have been, Yeah, I think it was in my early twenties. In fact, I think I was home from college, if I remember right, this has been a little while, but I was down in San Diego and they had just recently had some big fires in southern California. And this happens quite a lot. You get kind of the Santa Ana winds, you get these really hot dry winds blowing around, and then a fire happens, and then the fire just kind of gets outta control.

And in the community where we grew up, there had been over the years, a couple of fires where people’s homes were burned down, and they had to evacuate. It’s kind of a real deal that you have to deal with down there. And I was watching the news, which I never recommend. I don’t really do that anymore, but back in the day, I had the news turned on and I saw a news clip where they were talking about the fires. And while they have the video of the fires in the background kind of showing what was happening, they were talking with this college professor from the local college and they were talking about what’s gonna happen to all these people and to the economy and all this kind of stuff. And literally, that professor started making the argument not started. He made the full argument that we’re talking about here.

He said, Well, actually, it’s kind of a weird argument, but this can actually be a good thing because it’s gonna really give a lot of benefits to the construction industry and they’re gonna have to create new houses and it’s gonna put a lot of people to work. And that’s just insurance money that would just be sitting there. And so it’s good to give all these people jobs. And so this is actually a benefit too. And I’m like, Oh my gosh, that’s literally what Frederic Bastiat was talking about. It’s not just this thing that happened a hundred, 200 years ago when he was talking about it. This is literally happening before our eyes that these people, these economists, these people who claim to understand how the economy works, they’re using these fallacies and bad ideas. And I was just so blown away that I was literally witnessing it in front of my eyes.

Brittany: We also see that every time there’s a natural disaster, like a hurricane, I think it’s hurricane season or now around the time we’re recording this, and every time there’s a lot of destruction, you always see an economist saying that, saying, This is terrible, we’re so sad. But think of all the builders, the construction companies that are gonna get money. Think about all these people. So we see it play out in that too. And it’s funny because every time it happens, I have the same thought you did where it’s like, oh, this is actually the boss’s words coming to life. And one thing, and it might be a little bit harder for our younger listeners, but for older listeners, absolutely read the text of Bastiat that would the which is seen in that which is unseen because it’s so snarky, I guess would be the term to use. Yeah, it’s very sarcastic, but it’s written in a very relatable way because he puts a perspective on just how silly these economists are.

Connor: I think that’s a good idea to share. Let’s make sure we include that on the show notes page for today. So you can find that as always, at tuttletwins.com/podcast. It’s not a long essay and it is to Brittany’s point and a very enjoyable read, You see a lot of similarities to what’s happening today. So for any teenagers and adults listening, that would be a great thing to read. And it is so interesting, right? Because this didn’t just happen in mid 18 hundred, France this happens in 2020 America, we see it all the time. You see the, Oh yeah, the pandemic, Oh, how great it is for the toilet paper industry is a run on toilet paper and how great it is for people producing masks. And it’s like, okay, well if you’re just looking at this one narrow little factor, you can, I think of it when I was dating and I was looking for a girlfriend and I was dating a lot of girls, it would be silly for me to be like, Oh she plays the clarinet really well.

Okay? But you don’t wanna eventually marry someone just cuz they’re a good musician. There are a lot of factors that you want to consider. You want to think of a lot of different things when you’re thinking about who you want to date and who you want to marry. And so I kind of feel like that way with the economy, these economists, they’ll look at something right in front of their eyes, they’ll say, Oh, this is what we understand. This is what’s happening. But to use Frederic Bastiat’s term, that which is not seen, In fact, he talks about how in that essay, if you wanna be a really good thinker, if you wanna be a really smart person, then you need to make sure that you are focusing on the things that you can’t see. It’s very easy to look in front of you and say, Oh, broken glass, broken window, therefore a job is created.

Anyone can look at that and just come up with that conclusion. But that’s not a very smart person because they’re not thinking through the big picture. And so what Frederic Bastiat encourages us to do in the essay is to basically think of the things that you can’t see because our actions have consequences. If I do something mean to someone, I don’t know what the consequence of that is gonna be. They may be upset, but then maybe they go home and they have a really bad day and then they don’t do their homework or chores. And that creates all sorts of other consequences. All of our actions have consequences. And there are some that we can see and there are many that we can’t see, but we need to be smart and think through what all of those other effects are. Brittany, I see this a lot in working up at the capital and trying to change laws.

So often you get these politicians, these elected officials, and they’ll pass a law and they’ll make an argument and they’ll say, This law is going to do this, right? This law is gonna create this program. Okay, well, you know, just created a program and spent taxpayer dollars on this one little program. But what you don’t see, and in fact, I would encourage our listeners to go read again, The Tuttle Twins and The Road to Serfdom where we talk all about this. You think about the eminent domain and the land that was taken, which created a bunch of other effects that these central planners did not kind of foresee. And you see that in our day where these politicians, they’ll give money to this, but then they don’t see that, Oh wait a minute, because we gave money to this program, this other business shut down over here cuz they couldn’t compete anymore. And we didn’t intend that. I didn’t mean that to happen. I remember when Covid happened, the Texas governor passed a law shutting businesses down, and then there was this one business woman, I think she owned a salon if I’m remembering

Brittany: Oh, salon.

Connor: And she kind of protests. She engaged in a little bit of civil disobedience like we’ve talked about before. And she said I’m not closing my business down. And she was arrested. I think she spent a night in jail if I’m remembering right or a few days in jail,

Brittany: A few days, I think it was, yeah,

Connor: I think it was a few days. And the governor came out afterward and he’s like, Oh, I didn’t mean for anyone to actually go to jail. It’s like, okay, well when you have an action, in his case, it was ordering people around. Well of course the consequences are that some police somewhere is going to do that and the governor may not have intended for that to happen, but actions have consequences. So I think that’s a very good kind of critical thinking exercise for us to think about. If I punch my brother in the arm, what’s the consequence gonna be? Or if I disobey my mom, or if I don’t do my chores, or if I take this job over here, or if I steal this money or all these decisions, there are always these consequences that we have to think through. And it’s certainly that way when we’re talking about the economy, the really big economy of people buying and selling, that there are all these consequences that we need to think through.

Brittany: Absolutely, and I think you bring up a good point by saying that it’s not just for economics, right? It’s in our personal lives too. If you’re about to make a choice, you shouldn’t just be looking at the immediate or maybe the most obvious consequence. You should be saying, What are all the consequences that can happen? I think being able to do that, not only again help you with things like the economy, but will help you make decisions way into your adulthood. I mean, that’s what we should all be doing. And not enough people are doing that. So you’re absolutely right, Connor.

Connor: A good plan for adulthood, learning how to critically think and not In fact, I’ll add another little teaser here. I haven’t shared this publicly yet, so all you podcast listeners on episode one, we shared something that we haven’t shared with anyone else publicly still and probably won’t for a while. And now in this episode, I’ll share with you that we’re working on a future book. This will be for teenagers. This won’t be one of our children’s books, but we’re gonna have a book for teenagers about a guide to logical fallacies. And so again, these fallacies are these bad ways of thinking, these incorrect arguments. And you see ’em all the time throughout your life. And so we’re putting together a little book so that teenagers can better understand them and then know how to avoid them and how to counter them. So that is a fun project, probably be done by early next year.

That’s quite a bit of work. But something to share cuz it’s very related, it’s really important for us to think very clearly, to make good arguments and to try and think not just of the things we can see that are kind of easy, but try and understand all the effects, the consequences of our actions that might happen. So really good topic and certainly very pertinent for what’s happening in the economy today for us to always be thinking about. So make sure everyone heads to tuttletwins.com/podcast. You can find the show notes page if you wanna access that essay and see past episodes as well. Make sure you are subscribed and Share with a Friend. And until the next episode, Brittany will see you next time.

Brittany: See you next time.