Broken Window Fallacies

Culture was obsessed with the streets when I was coming of age in the early 1990s. Crack was epidemic. Bloods and Crips were in open warfare as the Los Angeles Riots smouldered. Movies like Do The Right Thing, Colors and Boyz in The Hood captured the zeitgeist of pointless violence, racial tension and despair.

I was heavily into conscious rap like Public Enemy, N.W.A. and KRS-One at the time, and I wanted justice. Instead, what we got was something called broken window policing.

Harvard political scientist James Q. Wilson and Rutgers criminologist George Kelling (who recently passed away) introduced the idea in a 1982 article that posited a broken window as a precursor to urban decay:

“A piece of property is abandoned, weeds grow up, a window is smashed. Adults stop scolding rowdy children; the children, emboldened, become more rowdy. Families move out, unattached adults move in. Teenagers gather in front of the corner store. The merchant asks them to move; they refuse. Fights occur. Litter accumulates. People start drinking in front of the grocery; in time, an inebriate slumps to the sidewalk and is allowed to sleep it off. Pedestrians are approached by panhandlers.”

The proposed remedy was to take a zero tolerance approach. Prosecute the first broken window before it spirals into chaos. Did it work? It depends who you ask.

Since New York City implemented broken window policing in 1990, the city has gone from over two thousand body bags a year to just 249 murders in 2019.

Opponents say that in-your-face law and order ended up looking more like profiling and harassment. It failed to account for the deep issues of race, poverty and mental health.

The other broken window fallacy

The real reason I’m writing this post is to talk about an equally important but far less-known broken window fallacy.

It concerns an economic question: if a window is broken, is that good or bad for the economy? More specifically, does it create or detract from national wealth?

French economist Frédéric Bastiat elucidated this issue in 1850 with the classic tale of a shopkeeper named James, whose careless son happened to break a square of glass.

In the story, witnesses who saw the broken glass comforted the shopkeeper by saying:

“It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"

Bastiat imagines that it will cost six francs to repair the damage. He says the glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child.

He calls this activity that which is seen.

It certainly looks as though six francs worth of economic activity has just taken place. And, based on this appearance, one might theorize that it is good to break windows. After all, it causes money to circulate and encourages industry.

But Bastiat abruptly puts an end to this line of thinking:

Frédéric does not want you to go around breaking things

“Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen.

It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library.

In short, he would have employed his six francs in some way which this accident has prevented.”

Bastiat sees that the economy is no better off when six francs go towards a broken window rather than towards shoes or a book. At best, it’s neutral.

More likely, it’s a loss, because James has to spend six francs just to get the world back to where it was before - with an intact window. What if he could have spent that six francs improving the world, perhaps by growing his business, finding an efficiency or creating an innovation?

I like how this story illuminates the hidden cost of messing with markets.

When a government sets out to fix some “broken window” or another, they often do that which is seen in order to give some segment of society a bigger piece of the pie, but it comes at the expense of that which is not seen, which often has the potential to increase the size of the pie for everyone.

In most cases, I’d rather have the shopkeepers decide.