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Economics Lesson 115: Explain the broken window fallacy

Welcome back to my school essays, I hope you enjoy it and let’s begin!

The broken window fallacy is a concept that illustrates the fallacy of thinking that destruction, like breaking a window, can actually stimulate economic growth. The idea behind the broken window fallacy is that people assume that the money spent to repair the broken window would be good for the economy because it would create jobs for window repairmen, and that money would then be circulated in the economy.

However, this logic is flawed because while repairing the broken window may create a job for the repairman, it does not take into account the opportunity cost of the money used to pay for the repair. That money could have been used for other things, such as investing in a new business or buying new goods and services, which would create more jobs and generate more economic growth in the long term.

The broken window fallacy also fails to consider the unseen costs of destruction. For example, if a business owner has to spend money to repair a broken window, they may have to cut back on other expenses such as employee wages or investments in their business, which could ultimately hurt the economy.

Therefore, the broken window fallacy is a warning against the idea that destruction can stimulate economic growth. It is important to consider the opportunity cost and unseen costs of destruction before assuming that it will have a positive impact on the economy. Instead, investing in new businesses, infrastructure, and education can lead to long-term economic growth and prosperity.

Thank you for reading this essay! I hope you enjoyed reading it or learned something new! I’ll be posting more soon so stay tuned! If you haven’t done so yet, feel free to check out:

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