The broken window fallacy is actually an argument in economics against the benefits of destruction and repair as a form of economic stimulus or bonus. Many people argue that money spent on repair of something is beneficial since it is paid to a person who must repair it and motivates economic benefits for that person. While this is certainly true, this argument ignores the possibility of how that money may have otherwise been spent and who would have benefited from such spending. This fallacy is often used to argue against the idea that war is financially beneficial for a country’s economy.
Based on the broken window parable, the broken window fallacy is an economic argument rather than an established fallacy within formal or informal logic. The broken window parable was first related by the French economist Frederic Bastiat as a way of demonstrating that many economic models do not consider unseen factors or consequences. In this parable, a shopkeeper’s son accidentally breaks one of the windows in the shop. As a response to this, bystanders console the shopkeeper by reminding him that the money he spends to repair the window is beneficial for the glazier and for the economy as a result.
This argument, that the money spent is beneficial for the economy, is the heart of the broken window fallacy. While Bastiat indicates that the money is certainly beneficial for the particular glazier called upon to repair the window, it does nothing in particular for the economy that it might not have done otherwise. That money could have been used by the shopkeeper to pay for any number of other things he needed. Any of these other things would have just as easily put that money into the economy and have been just as beneficial for someone other than the glazier.
The point of the broken window fallacy is that a more fully developed economic model needs to consider unseen consequences for events. While the glazier may benefit from the broken window, the shoemaker who would have made new shoes for the shopkeeper or the tailor who would have made a new suit for him have now lost money in the situation. According to the fallacy, the money spent on the window would have still entered the economy in a way the shopkeeper preferred. A secondary negative financial consequence is also seen by the shopkeeper, who previously had a working window and the amount needed to repair it, whereas he now only has a working window.