The broken window fallacy does not always hold true (Debate Case)

[QuisCustodiet]

Bob Murphy took this question head-on, even quoting Krugman writing almost exactly what you wrote in your first paragraph. I hope you’ll check it out: http://mises.org/daily/3155

[cab21]

so a storage unit would be better than a bank( which has a storage unit, it just loans money out with the gold in storage to back up whatever it loans)?

invest and store seems better than store without investing.

[cporter]

If I could name two things that are most responsible for confused theories, it would be these: measuring economics in money, and ignoring time.

The broken window fallacy has nothing to do with the shuffling of money. The point is that there has been a net reduction in the stock of goods, so that now work must be replicated. If work must be replicated just to get us back to where we were before then we are worse off. The fact that you can dip into part of your stock of goods (money) to trade for a replacement window doesn’t mean there was no reduction in the stock of goods.

The argument defeats itself here:

@Austen

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.

If saving your money produces no economic benefit, where does the money come from to replace the broken window? Of course, it came from past savings, and is now being put to use in exchange. If he had no savings he wouldn’t be able to do that.

Wealth is measured by what we have, not what we must work to obtain in the future. Break windows, reduce wealth. Simple as that.

[Smiling_Dave]

Dang, had to revise the article.

[JackCuyler]

Yes, the equation is correct. Total Spending does equal Total Income. But Total Income is not a measure of Total Wealth, obviously. For example, if I make $30,000 a year selling all I own, my Total Income is 30 thou, but I am not any better off.

Actually you are better off, ex-ante, or you would not have made the sale.