Print Blog Article

Seeing the Unseen: the Broken Window Fallacy

Wed, Sep. 11, 2013 Posted: 09:30 PM

How are faith and economics similar? Both recognize the importance of "unseen" activity.

The Bible places much emphasis on faith and defines this word in Hebrews 11:1 which says, "Now faith is the assurance of things hoped for, the conviction of things not seen."

Near the end of his life French economist Frédéric Bastiat wrote an essay titled Ce qu'on voit et ce qu'on ne voit pas [translated in English as That Which Is Seen and That Which Is Unseen]. Bastiat recognized that there are "unseen" costs when destructive activities take place.

Investopedia explains, "... the fallacy comes from making a decision by looking only at the parties directly involved in the short term, rather than looking at all parties (directly and indirectly) involved in the short and long term."

In this video Amanda Billyrock illustrates and narrates chapter two of Henry Hazlitt's book Economics in One Lesson which also explains the broken window fallacy.

According to Investopedia, "The broken window fallacy is often used to discredit the idea that going to war stimulates a country's economy."

Related Links

CP Blogs