Broken Window Fallacy : LUSENET : TimeBomb 2000 (Y2000) : One Thread

In economics, there's a doctrine called the 'broken window fallacy'. In a nutshell, it explains why destruction is BAD for the economy, though it may appear to be GOOD for the economy.

If some vandal breaks my window, I have to get the glazer out to repair, pay her/him, buy new glass - all of which should be GOOD for the economy as a whole. Right ? NO! Because I, as a rational ;) human being, could've used that money in a more purposive, rational way to advance higher economic purposes, with ultimately greater economic benefit.

Despite the above, I'm not so sure the 'broken window' story really IS a fallacy. Maybe y2k will ADVANCE the economy. Look at all the legacy code that's getting flushed out. Systems that took decades to write and tune are being replaced by modular, newer stuff in a matter of weeks or months.

BTW, to avoid your own personal 'broken window fallacy' when y2k hits, coat your windows with 3M Scotchshiled clear coating in 1.5, 4, or 6 mil :-)


-- Blue Himalayan (bh@k2.why), December 10, 1998


The Broken Window Fallacy can be found clearly illustrated in the first six chapters of "Economics in One Lesson" by Henry Hazlitt (A great refutation of socialist cliches).

Y2K, however, will not be good for the economy if it bites real hard -- The savings and investments of millions will evaporate with the collapse of the banks and the stock market. Pipes will burst, people will freeze to death, riots will destroy cities...

In a worse case scenario, Y2k would be bad for the economy in the same way that war is bad for the economy. (Lots of broken windows)

-- Menger

-- Menger (, December 10, 1998.

The broken window fallacy was written by Frederic Bastiat in 1850 in his Treatise, " THAT WHICH IS SEEN, AND THAT WHICH IS NOT SEEN", just before he died.

I highly highly rcommend this and "The Law" by Bastiat. It should be required reading in all schools. It is in our 'home school'.

On the score of your having said, "Maybe y2k will ADVANCE the economy." Then not only do you have no clue at all about which Bastiat wrote, but neither do you have a clue about the scope and magnitude of the consequences of Y2K.

-- Paul Milne (, December 10, 1998.

Hmm...suppose the store owner replaces his broken window with a new triple-pane insulated storm window. He'll save on his power bill, and in the long run will be more efficient. Now, you can argue that if that were truly the best option, he would have done it without the window being broken...but that assumes that people act rationally in their long-term best interest, instead of being blinded by the short term. This is manifestly not the case, as proven recently by certain psychological studies as well as by the very existence of the Y2K bug.

Whether companies transfer to new systems that allow more rapid development, or simply get to know their old systems a lot better as they remediate, they will find themselves more efficient in the end.

Except for one little problem.

Every window in our town has been broken at once. The window installers are all booked up. It's winter, and our store owner with no window might have to close up shop.

-- Shimrod (, December 11, 1998.

" Look at all the legacy code that's getting flushed out. Systems that took decades to write and tune are being replaced by modular, newer stuff in a matter of weeks or months."

The problem this theory is that the replacement you talk about isn't happening in a lot of cases. Remember, the ultimate goal of Y2K projects isn't to improve or increase functionality but to preserve existing functionality (i.e. date arithmetic). Any improvements that happen along they way are a bonus, but there is a tremendous volume of legacy code out that that will only be minimally patched for Y2K and not improved or replaced.

-- Paul Neuhardt (, December 11, 1998.

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