re: EBC Book #1 - Economics in One Lesson by Henry Hazlitt

I found Bastiat's broken window fallacy a bit tricky. At first glance, and in accounting terms, it would appear the baker's account would be credited $50 and the glazier's debited $50, which would seem to be the same result as if the baker's account were credited $50 and the tailor's account were debited $50.

However, I think it's more nuanced. But for the vandalism, there still would have been the window AND there would have been a new suit introduced into the economy. That being said, what if instead of the baker buying the new suit, the new glazier bought the new suit? Isn't that the same result?

I think it's tempting to say yes, but consider this. There are only finite resources in the world, which are used to produce finite goods with finite lives. In this example, the window didn't live out its useful life, so some of the resources which were used to procure it were in fact wasted. If, on the other hand, the baker's $50 had been used to buy the suit, the window would still be living out its useful life and the suit would begin a new useful life.

If the baker paid $50 for the initial window and it had only lived 50% of its life when broken, these are the bookings:

Initial window: -$50 to baker and +$50 to glazier

Loss in value to baker due to premature "death" of the initial window: -$25

New window: -$50 to baker and +$50 to glazier

Glazier, instead of baker, buys new suit: -$50 to glazier and +$50 to tailor

The net result is a loss in value of $25 which wouldn't have occurred had the initial window lived out the rest of its life.

Maybe Hazlitt will get into more detail as I read on, but is this how y'all are thinking about this?