Prompt: Give an example of the broken window fallacy as applied to a government intervention that was not discussed by Hazlitt.
The broken window fallacy describes that which is seen vs that which is unseen. Its been argued that a broken window makes the economy more money, since the owner of the window has to pay others to fix it. The window fixers make money, that is whats seen. What is unseen is where the window owners money would have gone if he didn’t have to spend it on the window.
A government example of this is taxes. Citizens are taxed, and lets say the government uses these taxes to repave a street. The repaved street is the thing seen, the unseen is where that tax money would have gone if the people had been allowed to keep it. It can be argued repaving the street made the economy money, since the government had to pay others to fix it. The ones paving the street made money, that’s what is seen. But the unseen, where the money would have went, can never be known.
One thought on “Economics Week 25 Broken Window Fallacy Taxes”
Interesting analysis. Definitely apropos re taxes and where tax money would have gone if it had not been txed.