The following excerpt is taken form Henry Hazlitt’s book, Economics in One Lesson, though the origins of the concept of “opportunity cost” are attributed to French theorist, Frederic Bastiat. I chose to quote verbatim because he does an excellent job of portraying the parable in a readable and relatable form. The significance of this teaching cannot be overstated – too much of today’s thinking involves such terrible and short-sighted thinking, even outside the field of economics. While there is truth to the notion of “creation from destruction,” how it can be rightly applied to human systems is much more limited than is typically thought. It would serve us well to remember this parable often. Surely, I will refer to it in posts to come.
A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has a bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate of glass window cost? Two hundred and fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more to spend with still other merchants and so on ad infinitum. The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.
Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper wil be out $250 that he was planning to spend for a new suit. Because he has had to replace the window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.
The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. The will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.
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One evening at the University I was attending, I was walking with a friend who, when she had pulled out her last cigarette, crumpled up the box and threw it on the ground of the parking lot. I looked at her in shock for her brazen littering. Quick to see my environmentalist outrage she quickly began to rationalize her own version of the broken-window fallacy. “Littering is good because it will create a job for someone to clean it up.” My rebuttal was an unsophisticated, near inarticulate, diatribe about how we need to take better care of the Earth and our shared human spaces – I even had to pick up the cigarette box and threw it away in the receptacle not far from where we walked. Had I known then what I know now, I could have argued more effectively and in a manner that was to her self-interest. I could have said, “Yes, that is true. But, if you throw it away yourself, that job will go unneeded and the money to pay that person a salary can be saved. Eventually, this savings can be passed on to us by lower tuition because the University has one less employee to pay; or, similarly, they could afford to pay higher salaries to better teachers thus improving the quality of our education, or some other more productive project.” Yet one of many “I should have said” stories I have. But the lesson has been learned, and my argument awaits new specious reasonings.
There is no shortage of similar sophistries in contemporary American life. My hope is that if we are mindful, we can identify and counter them. Maybe in this way, our individual efforts will be more effective in improving our lives and society.