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The broken window fallacy always hold true

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Voting Style: Open Point System: 7 Point
Started: 11/2/2012 Category: Economics
Updated: 3 years ago Status: Post Voting Period
Viewed: 1,573 times Debate No: 26820
Debate Rounds (4)
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The broken window fallacy is the idea that events that cause destruction (ex: breaking windows) can have economically positive effects.

Economically positive - This can mean reducing unemployment, increasing gross domestic production, or increasing economic growth. These effects can be short-term or long-term.

1. No semantics
2. First round is for acceptence and clearification of terms.
3. No new arguments in the last round.
4. Text-only debate.
5. All source material must be easily accessable



I would like to accept your challenge.
Debate Round No. 1


I thank PRO for accepting my debate.

Total Spending in an economy is equal to total income

In an economy, based on simple arthimetic and common sense, one can see that all spending is equal to income, assuming that the money supply is not increasing. One man's consumption is another man's income. If I buy a fruit at the store, then the store has income, which they would not have If I did not spend my money. If for example, everyone saved their money and nobody spent any money, nobody would have income.

Total spending = Total income

Therefore, the more spending that occurs in an economy, the higher one's income is.

Another way to think of this is the velocity of money:

M*V = Q*P
This is the quantity theory of money. It states that the velocity of money (how fast money is ciruclating) times money, is equal to the quanity of goods and services, times the price of these goods and serves.

M = money, V = velocity of money, Q = quantity of goods and services, P = price of goods and services.

So as one can see If the velocity of money increases, then so do the quantity of goods and services, so long as prices do not not increase at the same rate.

Prices have been observed to be "sticky" or resistent to change in the short-run and during recessions. Therefore an increase in the velocity of money corresponses to an increase in goods and services.

A broken window causes spending to increase

So let's say someone's window is broken. This means that someone is needed to fix the window. This corresponds to an increase in income for the glassman and the glassman can use his income to buy other goods and services, and so forth causing a multiplier effect.

Counterarguments to the broken window argument

Propoents of the broken window argument fallacy argue that a broken window is bad for an economy for the following reasons:
a) The broken window means that real resources have to be used to fix the window, some of which could be used for other goods and services
b) It ignores the unseen vs. the seen.
c) The increase in spending will just cause inflation

I will demonstrate why these arguments are wrong.

In a recession or depression, resources are underutilized

A recession occurs If resources are not being fully utilized. This is emperically verified. Many nations have high unemployment and the US has had high unemployment in its past. For example, Greece has an unemployment rate of 25%.

What this means is that people who are willing to work are unable to do so. This also corresponds to factories not producing at full capacity. The economy is not producing at maximum capacity. The reason the economy is not producing at maximum capacity is because people are not spending their money. As one can see in this chart, the 2008 recession is considered one of the worst recessions since the Great Depression and the result is a skyrocket in savings:

The same goes with banks that are holding excess reserves:

Therefore there is no need to worry about taking resources from someplace else during many recessions and depressions.

The person with a broken window could have just saved his money, thus producing no real economic effects

A counter-argument is that the person with the broken window instead of spending his/her money on the window, would have spent the money on other goods/services, thus the broken window is a net-harm. However, this ignores the fact that the person could have just saved his/her money instead, which would produce no economic benefit at all.

Prices are "Sticky" so inflation does not necessarily occur. The increase in spending would only cause inflation if the economy is producing near maximum capacity

Prices and wages have been observed to be sticky, For example, during a recession, if there were unemployment problems, then one would expect that wages would just lower and the market would clear itself. However, this has not been observed. One can also see numerous examples of how prices do not change even with changes in demand. For example, movie tickets prices remain the same regardless of how many tickets are sold. The same can be observed with books. The Harry Potter books did not have a spike in prices because there was a spike in demand of people who wanted to read these books. A Harry Potter book costs about the same as most other books.

Emperical Evidence of the "Broken Window Fallacy" in action

One example of the broken fallacy in action is government increasing its spending during recessions/depressions. This is an example of how spending increases the domestic goods and services in an economy. Emperical results have proven that the fiscal multiplier does exisit.

Furthermore, one can look at history. If one looks at World World II after the great depression, the government spent massive amounts of money on the ar efforts. The result was that unemployment decreased dramatically, almost down to zero.

Economic activity boomed:

After the end of WWII, the US was the most powerful economy in the world, and continued to increase its economic growth creating great prosperity.


While the broken window fallacy is a fallacy if the economy is producing at its full potential, this is not a fallacy during recession and depression times. Real variables, that are considered to be economically positive, such as an increase in gross domestric production, occur If there is a net increase in spending, which can be jumpstarted through any event, such as broken windows.


Firstly, I would like to thank you for hosting this debate. Now, I would like to take the time to rebut your arguments:
1.Total Spending in an economy is equal to total income:
I would like to argue other wise, Americans as well as our fellow people in other developed countries spend more than they earn a 2010 study (1.) by the Bureau of Economic Analysis and a 2012 Commerce Department report (2.
1.( )
2.( show that the figures for total income as well as for total spending may have risen at the same time, but not equally. Both studies show that these two figures are not equal, but indirectly related. The reality is that as income has risen, spending has risen even faster. Thus spending in an economy is not necessarily linked to income.
2. A broken window causes spending to increase
It is true that if a window is broken that spending will increase, this holds true with anything. For example, if your phone breaks what do you do? You buy a new phone this increases spending, the company that makes that makes your phone to turn a profit thus enabling them to buy more materials to make the phone's leading to an increase in production as well as in employment, thus allowing more people to buy goods and services, thus stimulating the economy. I do admit that there is the problem of the insurers possibly losing money on insuring people's stuff if it breaks .
3.In a recession or depression, resources are underutilized
I wouldn't say that the resources are being underutilized. I would say that they are just used more efficiently over the course of the recession our economy is actually bigger today than it was in 2008 when the recession began
I would also like to repeat my previous argument that even in a recession savings/incomes are outweighed by personal spending.
4.Prices are "Sticky" so inflation does not necessarily occur. The increase in spending would only cause inflation if the economy is producing near maximum capacity
Prices may be sticky in some areas, but in many commodities such as gold or wheat they are driven by supply and demand. According to a Cato Report economic growth/increase in spending has been shown to actually drive inflation down
as long as you have supply slightly outpacing demand.

While the Broken Window Fallacy may be a bit off it can be very close to reality under most circumstances.

Debate Round No. 2


I thank PRO for his response. However many of his rebuttals do not refute many of my main arguments. He has not demonstrated why the broken window fallacy always holds true. Since he is the affirmative, the burden of proof lies on him. In fact, in his onw conclusion "While the Broken Window Fallacy may be a bit off it can be very close to reality under most circumstances." This is a concession, since PRO had to show that the broken window fallacy is a fallacy under all circumstances. The resultion is that it always hold true, not mostly holds true. This is an automatic win for me, but I will continue to respond for the sake of argumentation.

Dropped arguments

Pro has dropped the following arguments:

-Emperical evidence of the "broken window fallacy" in action. : Pro does not contend that WWII, while destructive, increased economic output or that government spending increases gdp during recessions and depressions.

-People in a recession just save his/her money thus producing no real economic effects: Pro does not dispute this data that the savings rate and excessive reserves in banks dramatically increased during the Great Recession. As stated previously, this produces no real economic benefit, since gdp is based on spending, which cannot


1. Total spending in an economy is equal to total income

Pro states that individuals can spend more then their income. However, I do not dispute this. In an open economy, any individual can save more or spend more then he/she earns. But the reason why some people can spend more then he/she earns is because he/she is in debt to another individual. One person's debt is another individual's investment. In a closed economy, the sum of everyone.

Pro did not dispute the logic that toal spending = total income, only on emperical grounds. However this discrepency arises becauses the US is not a closed economy. The US has 14 trillion dollars in foreign debt[1], and has around 15% of its gdp in imports and 11% in exports. If one is to look at in a global scale, then the world economy is a closed system. Recessions and depressions tend to occur on a global scale If economies are large enough, as was the case of the global financial crisis of 2008 and great depression. Also, since most of the US gdp is still within its own borders, it can be considered semi-closed.

Since PRO admits that income is strongly correlated with spending, he does not really contend this position.

2. A broken window causes spending to increase

Pro does not contend that a broken window causes spending to increase. However, Pro states that other destructive actions could cause the same result. The resolution specifically stated that:

The broken window fallacy is the idea that events that cause destruction (ex: breaking windows) can have economically positive effects.

A broken window is simply an example. Pro agrees with me on this resulotion, and actually negates the own resolution Pro is trying to defend.

3. In a recession or depression, resources are underutilized

Pro disagrees with this statement but goes on a red herring. None of Pro statements demonstrate that resources are not being underutilized.

a) I demonstrated that resources can be underutilized just through looking at unemployment rates, in which people who want to work, aren't working, thus an underutilization of workers. Pro did not rebute this.

Pro states that resources are being used more efficiently, and uses the increased in gdp to support this. However a few problem with the statment are.

a) Just because resources are used more efficiently, the
b) The real US gdp per capita is lower then it was pre-recession. What Pro showed was nominal gdp. Nominal gdp is different from real gdp, because nominal gdp does not factor in inflation. Also, the US population is growing, so even if real gdp is growing, if the population is growing at a faster rate, then the standard of living decreases.
c) Real gdp decrease once the recession occured. This is because resources were underutilized during the recession.

This point remains affirmed

4. Prices are "Sticky" so inflation does not necessarily occur. The increase in spending would only cause inflation if the economy is producing near maximum capacity

Pro agrees that prices are sticky, only that in some areas they are not. However, based on the equation:
MV = P*Q, even if there is not complete stickiness, an increase in velocity of money would stick correspond to some increase in quantity of goods and services, even if the proportion is not equal. In all for quantity of goods and services NOT to decrease, there would be absolutely no stickiness, which Pro even admits isn't true.

Pro then states that economic growth has been show to drive inflation down, but that just reaffirms my position that inflation would not occur due to a broken window during times of recessions, just an increase in GDP.


I have demonstrated how a broken window or other event of destruction corresponds to positive economic indicators, specifically gross domestic production. Thus, the broken window fallacy is not always a fallacy.



onlypaulo1 forfeited this round.
Debate Round No. 3




onlypaulo1 forfeited this round.
Debate Round No. 4
1 comment has been posted on this debate.
Posted by TheElderScroll 3 years ago
Unemployment rate in Germany on the eve of WWII was almost zero.
1 votes has been placed for this debate.
Vote Placed by RyuuKyuzo 3 years ago
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Total points awarded:40 
Reasons for voting decision: It's too bad pro didn't stick around, but a ff is a ff.