One of the more persistent economic fallacies of our day.
July 31, 2010 9:16 AM Subscribe
The Broken Window Fallacy. [SLYT]
Obligatorily, Jean-Baptiste Emanuel Zorg explains:
Obligatorily, Jean-Baptiste Emanuel Zorg explains:
[closes office door, places an empty glass on desk]
Life, which you so nobly serve, comes from destruction, disorder and chaos. Take this empty glass. Here it is, peaceful, serene and boring. But if it is...
[Pushes glass off table and crashed.]
Destroyed!
[robot cleaners move to clean broken glass]
Look at all these little things. So busy now. Notice how each one is useful. What a lovely ballet that ensues, so full of form and color. Now, think about all those people that created them. Technicians, engineers, hundreds of people who'll be able to feed their children tonight so those children can grow up big and strong and have little teeny weeny children of their own, and so on and so forth. Thus, adding to the great chain... of life.
There's no need to mark your post SLYT. Especially when it's actually not one.
Oops.. My mistake, the original version was a single YT, but I added Zorg as an afterthought.
posted by tybeet at 9:25 AM on July 31, 2010
Oops.. My mistake, the original version was a single YT, but I added Zorg as an afterthought.
posted by tybeet at 9:25 AM on July 31, 2010
If the entire economy is suffering from a lack of nerve, why couldn't a catastrophic event compel people to act and take risks again?
posted by 0xdeadc0de at 9:30 AM on July 31, 2010
posted by 0xdeadc0de at 9:30 AM on July 31, 2010
I couldn't even concentrate on what was being said, ridiculous accents and all, because the "background" music was so loud and distracting. What a shame.
posted by phunniemee at 9:31 AM on July 31, 2010 [1 favorite]
posted by phunniemee at 9:31 AM on July 31, 2010 [1 favorite]
Meh. I enjoy pointing out fallacies as much as the next guy, but the speaker undermines his argument with the fallacious claim that "the citizens would have spent their tax dollars on other goods and services." If economics were really so trivially obvious, we wouldn't have spent generations debating the merits of stimulus spending.
posted by Galvatron at 9:34 AM on July 31, 2010 [11 favorites]
posted by Galvatron at 9:34 AM on July 31, 2010 [11 favorites]
I believe anything explained to me in a terrible Italian accent, so I'm on board!
posted by lore at 9:34 AM on July 31, 2010 [2 favorites]
posted by lore at 9:34 AM on July 31, 2010 [2 favorites]
The analogy in the video seems off. In the window example, the "community" creates either a suit or nothing. A suit is determined to be better than nothing. In the government example, either, say, a high-speed railroad is built, or a flat-screen TV is purchased. One could easily argue that the railroad benefits more to the "community" and the economy than the shiny TV, no?
It's also assumed that the tax-payers would never just save the money.
posted by spaghettification at 9:35 AM on July 31, 2010 [10 favorites]
It's also assumed that the tax-payers would never just save the money.
posted by spaghettification at 9:35 AM on July 31, 2010 [10 favorites]
Shorter Republican: If you build roads, you're putting my tailor out of business.
posted by ifandonlyif at 9:36 AM on July 31, 2010 [8 favorites]
posted by ifandonlyif at 9:36 AM on July 31, 2010 [8 favorites]
Fridges and surfboards are made in China.
posted by Meatbomb at 9:37 AM on July 31, 2010 [2 favorites]
posted by Meatbomb at 9:37 AM on July 31, 2010 [2 favorites]
[DLAE] - single link austrian economics
GOOGLE RAND PAUL!
posted by ennui.bz at 9:38 AM on July 31, 2010 [1 favorite]
GOOGLE RAND PAUL!
posted by ennui.bz at 9:38 AM on July 31, 2010 [1 favorite]
I can't watch youtube, but I did google the fallacy of the broken window. Now, I just need a context to bring me into this conversation...
posted by PigAlien at 9:39 AM on July 31, 2010
posted by PigAlien at 9:39 AM on July 31, 2010
Yeesh, I don't know where to begin. Basically, this is a false equivalence. The vandal destroys the window, thus actually destroying physical goods. The government does not actively destroy roads or bridges in order to tax and divert funds to public works.
Taxation is a way of dodging the tragedy of the commons. Without taxation, it would be in any one person's best interest to not contribute to the "road fund" or the "bridge fund." You can also see lesser taxation in the form of club dues, where it's easier to force everyone to pay $20 per semester than collecting for their share of the pizza every meeting.
It's all well and good to complain about government waste or misappropriation of funds, but I really hate the meme that government steals money that would otherwise be wisely spent. I'm skeptical that people would really band together and build roads or bridges without a government.
posted by explosion at 9:39 AM on July 31, 2010 [12 favorites]
Taxation is a way of dodging the tragedy of the commons. Without taxation, it would be in any one person's best interest to not contribute to the "road fund" or the "bridge fund." You can also see lesser taxation in the form of club dues, where it's easier to force everyone to pay $20 per semester than collecting for their share of the pizza every meeting.
It's all well and good to complain about government waste or misappropriation of funds, but I really hate the meme that government steals money that would otherwise be wisely spent. I'm skeptical that people would really band together and build roads or bridges without a government.
posted by explosion at 9:39 AM on July 31, 2010 [12 favorites]
Sophistry. Is it really necessary for intelligent people to discuss how stimulus spending is different from throwing a brick through a window? Well, here goes: Imagine that the window was broken not by a hooligan, but by a storm. In fact, imagine that the entire infrastructure of the town is decaying because the residents are so risk-averse, or so interested in spending money on yachts made overseas, that they are not spending locally. Then taxing the townspeople and investing in capital projects (roads, schools, etc.) that will create new wealth is stimulative.
posted by drdanger at 9:43 AM on July 31, 2010 [3 favorites]
posted by drdanger at 9:43 AM on July 31, 2010 [3 favorites]
certainly an idea worth discussing, but the video is just plain shitty.
posted by kitchenrat at 9:45 AM on July 31, 2010
posted by kitchenrat at 9:45 AM on July 31, 2010
certainly an idea worth discussing, but the video is just plain shitty.There's a particular set of topics -- economics and intellectual property most notably -- that can't be discussed without the conversation devolving into an endless parade of flawed analogies. It's like Godwin's law, but with facile similes wearing the silly moustache.
posted by verb at 9:50 AM on July 31, 2010 [2 favorites]
Oh dear. He started off doing so well and then blew any semblance of impartiality by exercising the fallacy himself: only considering projected losses caused by public spending programmes.
If you're going to demonstrate a fallacy objectively, don't use it to make a dubious political point.
posted by Decani at 9:52 AM on July 31, 2010
If you're going to demonstrate a fallacy objectively, don't use it to make a dubious political point.
posted by Decani at 9:52 AM on July 31, 2010
Gosh, an entire area of Kensian economics undermined by a silhouette of a baker with the worst Italian accent I have ever heard, all based on an 1850 essay from an economist who argued parables that were influenced by anticommunist propaganda and believed that laisser-faire competition is the ideal organizaing system for economics.
Sounds like the Tea Party has finally found their ideal economist.
posted by Astro Zombie at 9:56 AM on July 31, 2010 [7 favorites]
Sounds like the Tea Party has finally found their ideal economist.
posted by Astro Zombie at 9:56 AM on July 31, 2010 [7 favorites]
...so if you ever hear of the stimulative effects of wartime spending, terrorists, or stimulus bills, know that this is merely our old friend, the Broken Window Fallacy, dressed in new clothing, and grown fat beyond recognition.
So where did he get the money for the new clothing and all that food?
posted by weapons-grade pandemonium at 10:04 AM on July 31, 2010
So where did he get the money for the new clothing and all that food?
posted by weapons-grade pandemonium at 10:04 AM on July 31, 2010
PigAlien, I'm guessing you now know more about this issue, having done the google search (which, one assumes, has the wikipedia entry as the first or second link) than those of us who watched this video. (I'm not complaining about the post, it's a fun little animation.)
These little info thingies can be great, though. I recommend RSA Animation's doodle-mation of David Harvey's talk on our economic situation. It made me a David Harvey fan, and has me wondering if I'm a latent Marxist.
posted by Trochanter at 10:05 AM on July 31, 2010 [3 favorites]
These little info thingies can be great, though. I recommend RSA Animation's doodle-mation of David Harvey's talk on our economic situation. It made me a David Harvey fan, and has me wondering if I'm a latent Marxist.
posted by Trochanter at 10:05 AM on July 31, 2010 [3 favorites]
This reminds me of a little incident earlier this week. This guy, a salesman from a local glass company, comes in and says, "I was just driving by and noticed that your work truck has a broken windshield."
I go out and look at it. Sure enough. There's a chip right at the edge of the windshield, at exactly the right spot to run the crack all the way across and right through the drivers field of vision. The truck hadn't been driven for two days and wasn't cracked the day before. It looked like somebody had hit it with one of those "rescue" hammers for breaking windshields.
This son of a bitch had just broken our windshield and came in to tell us about it. He had done this like clockwork for a couple of years. Then he left town for a couple of years. During that time we never had a cracked windshield. Now he's back and we've got a broken windshield.
The cops shrugged it off, saying they don't investigate if the damage is under $500. I'm feeling like I should boost the economy by burning that son of a bitch's truck.
So he obviously believes this economic fallacy, but it's not a fallacy in his case, the bastard. The commission goes right in his pocket.
posted by warbaby at 10:07 AM on July 31, 2010 [8 favorites]
I go out and look at it. Sure enough. There's a chip right at the edge of the windshield, at exactly the right spot to run the crack all the way across and right through the drivers field of vision. The truck hadn't been driven for two days and wasn't cracked the day before. It looked like somebody had hit it with one of those "rescue" hammers for breaking windshields.
This son of a bitch had just broken our windshield and came in to tell us about it. He had done this like clockwork for a couple of years. Then he left town for a couple of years. During that time we never had a cracked windshield. Now he's back and we've got a broken windshield.
The cops shrugged it off, saying they don't investigate if the damage is under $500. I'm feeling like I should boost the economy by burning that son of a bitch's truck.
So he obviously believes this economic fallacy, but it's not a fallacy in his case, the bastard. The commission goes right in his pocket.
posted by warbaby at 10:07 AM on July 31, 2010 [8 favorites]
I believe anything explained to me in a terrible Italian accent
Paypal all a-you money to fleets-a mouse! It's-a nice-a for you, eh?
posted by fleetmouse at 10:11 AM on July 31, 2010 [6 favorites]
Paypal all a-you money to fleets-a mouse! It's-a nice-a for you, eh?
posted by fleetmouse at 10:11 AM on July 31, 2010 [6 favorites]
You have to put Krugman's statement in context. In 2001 the U.S. was in the middle of a recession with a shortage of aggregate demand. War spending is a way to stimulate aggregate demand. Krugman would not have said the same thing during a business cycle peak. Keynesians would agree that government deficit spending has a negative effect during normal times, but the opposite is true during a recession. Having people sit at home and factories sitting idle is a destructive waste of resources far more costly than a broken window.
It is difficult to argue with Austrian economists because they really do think in terms of juvenile cartoons.
posted by JackFlash at 10:20 AM on July 31, 2010 [5 favorites]
It is difficult to argue with Austrian economists because they really do think in terms of juvenile cartoons.
posted by JackFlash at 10:20 AM on July 31, 2010 [5 favorites]
Is this the kind of thing he's arguing against? Because the analysis presented in the video seems a bit lacking. I would love to see a post discussing the idea of the government spending multiplier and different arguments for and against it.
posted by demiurge at 10:26 AM on July 31, 2010
posted by demiurge at 10:26 AM on July 31, 2010
Man that was terrible.
posted by dobbs at 10:35 AM on July 31, 2010 [1 favorite]
posted by dobbs at 10:35 AM on July 31, 2010 [1 favorite]
Oh dear.
The broken window fallacy is genuinely false, in that it supposes that the broken window causes economic growth. It doesn't: it just diverts economic activity from one place to another.
But this is not the same thing as a Keynesian fiscal policy, sometimes called a counter-cyclical fiscal policy.
What that involves is noticing that economies tend to go through booms and busts. In a boom, there's too much economic activity and it pushes up prices. In a bust, there's too little economic activity and firms go bust and lots of people lose their jobs. So in that case, it helps if you can move economic activity not from one place to another, but from one time to another. In a boom, raise taxes to reduce economic activity. In a bust, spend the money you've saved from those taxes, or borrow some money and spend it, to increase economic activity then. Pay the borrowed money back in the boom.
When it claims that countercyclical fiscal policy is an instance of the broken window fallacy, this video is a lie.
posted by TheophileEscargot at 10:36 AM on July 31, 2010 [13 favorites]
The broken window fallacy is genuinely false, in that it supposes that the broken window causes economic growth. It doesn't: it just diverts economic activity from one place to another.
But this is not the same thing as a Keynesian fiscal policy, sometimes called a counter-cyclical fiscal policy.
What that involves is noticing that economies tend to go through booms and busts. In a boom, there's too much economic activity and it pushes up prices. In a bust, there's too little economic activity and firms go bust and lots of people lose their jobs. So in that case, it helps if you can move economic activity not from one place to another, but from one time to another. In a boom, raise taxes to reduce economic activity. In a bust, spend the money you've saved from those taxes, or borrow some money and spend it, to increase economic activity then. Pay the borrowed money back in the boom.
When it claims that countercyclical fiscal policy is an instance of the broken window fallacy, this video is a lie.
posted by TheophileEscargot at 10:36 AM on July 31, 2010 [13 favorites]
Money spent on roads just encourages people to drive cars which in turn enriches our enemies as it furthers global warming. See? I can make silly arguments too!
posted by Obscure Reference at 10:40 AM on July 31, 2010
posted by Obscure Reference at 10:40 AM on July 31, 2010
Yeah, there's a pretty significant hidden assumption in the broken window fallacy that's pretty important for current policy assumptions. If the baker didn't have to replace the window, he would have spent his money on other goods and services.
This is the same hidden assumption with trickle-down economics. If we give tax breaks to the rich, they'll have more money to spend and invest on other goods and services. It's just bullshit because A) if the money is put into an investment fund, but banks aren't making any loans anyway, there isn't going to be much economic stimulus, B) if there's too much money looking for investments, this can easily create speculative bubbles (e.g. mortgage backed securities) and C) even if the money is spent, then the economy is being driven by demand for rich persons' toys. An economy based on demand for yachts, private planes, mansions, etc. is an economy that serves the rich instead of the middle class.
Look, stimulus is about temporarily and artificially increasing macroeconomic aggregate demand in response to a temporary economic crisis. If consumer confidence is low, and banks are near insolvent and scared shitless making it difficult to get loans, the aggregate demand for goods and services in a country unsurprisingly drops. In a smoothly running economy, when private demand for goods and services leads to sustainable private-sector job creation, high taxes and fiscal stimulus can be bad things. When the economy is broken, fiscal stimulus is like the government taking out a loan against future generations to get things moving again. It's a good investment.
Yes, excessive fiscal stimulus can lead to inflation, but when interest rates are near zero and we're teetering on deflation, that's not a concern. Yes, increased taxes means less discretionary spending on the part of the consumer, and can lead to decreased demand. But when decreasing taxes on the top 5% leads to a budget deficit, it's even worse than the broken window fallacy, because the government is essentially taking out a loan against future generations while leaving it up to the members of the elite to decide whether or not that money goes back into the economy. Finally, WWII helped get us out of the Great Depression because in that case, it was politically acceptable to run a massive budget deficit (i.e. take out a loan against future generations) to fight a war, but not to help millions of unemployed and homeless Americans.
/rant>
posted by Nquire at 10:59 AM on July 31, 2010 [4 favorites]
This is the same hidden assumption with trickle-down economics. If we give tax breaks to the rich, they'll have more money to spend and invest on other goods and services. It's just bullshit because A) if the money is put into an investment fund, but banks aren't making any loans anyway, there isn't going to be much economic stimulus, B) if there's too much money looking for investments, this can easily create speculative bubbles (e.g. mortgage backed securities) and C) even if the money is spent, then the economy is being driven by demand for rich persons' toys. An economy based on demand for yachts, private planes, mansions, etc. is an economy that serves the rich instead of the middle class.
Look, stimulus is about temporarily and artificially increasing macroeconomic aggregate demand in response to a temporary economic crisis. If consumer confidence is low, and banks are near insolvent and scared shitless making it difficult to get loans, the aggregate demand for goods and services in a country unsurprisingly drops. In a smoothly running economy, when private demand for goods and services leads to sustainable private-sector job creation, high taxes and fiscal stimulus can be bad things. When the economy is broken, fiscal stimulus is like the government taking out a loan against future generations to get things moving again. It's a good investment.
Yes, excessive fiscal stimulus can lead to inflation, but when interest rates are near zero and we're teetering on deflation, that's not a concern. Yes, increased taxes means less discretionary spending on the part of the consumer, and can lead to decreased demand. But when decreasing taxes on the top 5% leads to a budget deficit, it's even worse than the broken window fallacy, because the government is essentially taking out a loan against future generations while leaving it up to the members of the elite to decide whether or not that money goes back into the economy. Finally, WWII helped get us out of the Great Depression because in that case, it was politically acceptable to run a massive budget deficit (i.e. take out a loan against future generations) to fight a war, but not to help millions of unemployed and homeless Americans.
/rant>
posted by Nquire at 10:59 AM on July 31, 2010 [4 favorites]
Author is idiot. He presumes that government spending translates into inflation, and that inflation is necessarily a bad thing. It isn't. Without inflation, we'd have higher structural unemployment. Exactly what we're seeing in this deflationary environment.
It was a pretty nicely done video, though, aside from the annoyingly loud music and the right wing stupidity.
posted by wierdo at 11:10 AM on July 31, 2010
It was a pretty nicely done video, though, aside from the annoyingly loud music and the right wing stupidity.
posted by wierdo at 11:10 AM on July 31, 2010
Egads, this is awful. Logical fallacies + awful production values = painful.
posted by Gucky at 12:11 PM on July 31, 2010 [1 favorite]
posted by Gucky at 12:11 PM on July 31, 2010 [1 favorite]
Yes, yes, I know it's YouTube, but it's frustrating that so many people that use the internet use it to promulgate right wing fallacies and tropes.
And they do it free of charge!
posted by clarknova at 12:23 PM on July 31, 2010
And they do it free of charge!
posted by clarknova at 12:23 PM on July 31, 2010
There's a particular set of topics -- economics and intellectual property most notably -- that can't be discussed without the conversation devolving into an endless parade of flawed analogies.
Not necessarily. IP law lets people own the ideas they make, which gives them incentive to make ideas. OTOH, ideas are really useful for personal / cultural development. So, IP law doesn't let owners exercise exclusive right to decide what people can do with their ideas. I think the latter should be the default position. In and out, no analogies.
posted by l33tpolicywonk at 12:25 PM on July 31, 2010
Not necessarily. IP law lets people own the ideas they make, which gives them incentive to make ideas. OTOH, ideas are really useful for personal / cultural development. So, IP law doesn't let owners exercise exclusive right to decide what people can do with their ideas. I think the latter should be the default position. In and out, no analogies.
posted by l33tpolicywonk at 12:25 PM on July 31, 2010
What? Where was the cop with the Irish accent and the taxi driver with the Indian accent?
posted by L'OM at 12:47 PM on July 31, 2010 [2 favorites]
posted by L'OM at 12:47 PM on July 31, 2010 [2 favorites]
explosion: "Yeesh, I don't know where to begin. Basically, this is a false equivalence. The vandal destroys the window, thus actually destroying physical goods. The government does not actively destroy roads or bridges in order to tax and divert funds to public works."
Except for that little pesky thing we spend a lot of our taxes on... War. (and let's admit - we have paid the cost of rebuilding in the past, at the very least).
That's one thing that always gets my goat, really. We can spend money on creation or destruction. Instead of life and creation, we choose death and destruction. How stupid and wasteful. Yet that's the one pet cause the right-wingers (despite their You-ra-ra for life and such) love to cheer.
posted by symbioid at 1:36 PM on July 31, 2010 [2 favorites]
Except for that little pesky thing we spend a lot of our taxes on... War. (and let's admit - we have paid the cost of rebuilding in the past, at the very least).
That's one thing that always gets my goat, really. We can spend money on creation or destruction. Instead of life and creation, we choose death and destruction. How stupid and wasteful. Yet that's the one pet cause the right-wingers (despite their You-ra-ra for life and such) love to cheer.
posted by symbioid at 1:36 PM on July 31, 2010 [2 favorites]
Right way to implement Keynesianism: set a target unemployment rate or GDP growth rate. Adjust taxes, interest rates, and government spending on a quarterly basis when we go over or under the rate.
Wrong way to implement Keynesianism: have politicians decide whether they think we're in a recession or not. Throw lots of money out when they think we're in a crisis. Never, ever increase taxes to counteract too-fast growth and pay for the stimulus.
posted by miyabo at 4:02 PM on July 31, 2010 [1 favorite]
Wrong way to implement Keynesianism: have politicians decide whether they think we're in a recession or not. Throw lots of money out when they think we're in a crisis. Never, ever increase taxes to counteract too-fast growth and pay for the stimulus.
posted by miyabo at 4:02 PM on July 31, 2010 [1 favorite]
Bastiat also believed that minimum wage regulations and maximum work hours were unnecessary interference in the workings of the free market and were harmful to the interests of workers. "The prevailing illusion of our age is that it is possible to enrich all classes at the expense of one another -- to make plunder universal under the pretext of organizing it."
I'm no economist, but there is some fallacious thinking there as well.
posted by blucevalo at 5:13 PM on July 31, 2010
I'm no economist, but there is some fallacious thinking there as well.
posted by blucevalo at 5:13 PM on July 31, 2010
Sport our tropes!
posted by sneebler at 6:54 PM on July 31, 2010 [4 favorites]
posted by sneebler at 6:54 PM on July 31, 2010 [4 favorites]
So...government is really just a hooligan going around breaking windows. Now I understand why those countries without governments are doing so well, while countries with governments that collect taxes and spend them on public services are such pits of despair and poverty.
posted by Jimmy Havok at 7:46 PM on July 31, 2010 [1 favorite]
posted by Jimmy Havok at 7:46 PM on July 31, 2010 [1 favorite]
The video doesn't even attempt to connect the broken window to government spending. Does the author really believe that any money collected from taxes is burnt upon receipt?
How do people put the effort into producing videos like this without questioning their premise?
posted by EtzHadaat at 1:46 PM on August 1, 2010
How do people put the effort into producing videos like this without questioning their premise?
posted by EtzHadaat at 1:46 PM on August 1, 2010
How do people put the effort into producing videos like this without questioning their premise?
They decided their premise (GUMMINT BAAAAAD!!!) long ago. Any thinking would be wasted effort. Now they're busy saying anything at all that they think will persuade other people of it.
posted by Jimmy Havok at 8:35 PM on August 1, 2010
They decided their premise (GUMMINT BAAAAAD!!!) long ago. Any thinking would be wasted effort. Now they're busy saying anything at all that they think will persuade other people of it.
posted by Jimmy Havok at 8:35 PM on August 1, 2010
So much libertarian thought seems to come down to something like "You're not my real daddy, you can't tell me what to do [with my money]!" Except this time the tantrum is directed at a brick.
posted by ethansr at 10:44 PM on August 1, 2010
posted by ethansr at 10:44 PM on August 1, 2010
Libertarians are just Right Wing Anarchists.
posted by Katjusa Roquette at 11:22 PM on August 1, 2010
posted by Katjusa Roquette at 11:22 PM on August 1, 2010
Quite a nice flashy video, but as pointed out very well upthread, clearly ignores the need for government to stimulate aggregate demand in times of recession. Also, government spending is often (though not always, and it's difficult to prove) more worthwhile than new TVs and carpets for rich people.
I thought the post would be about these broken windows.
posted by greytape at 2:46 PM on August 19, 2010
I thought the post would be about these broken windows.
posted by greytape at 2:46 PM on August 19, 2010
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posted by sveskemus at 9:21 AM on July 31, 2010