The "Broken Window Fallacy" argues that destruction can actually help the economy.

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The statement to evaluate is: The "Broken Window Fallacy" argues that destruction can actually help the economy.
Option: True. 
- A key point of the Broken Window Fallacy (originating from Bastiat) is that attention is often paid to the visible activity created by destruction (e.g., repairs, rebuilding) while overlooking the hidden costs and opportunity losses. In this framing, destruction can appear to stimulate economic activity because it creates demand for labor, materials, and services needed to fix or replace what was damaged. This can lead to a temporary rise in production and employment in the rebuilding phase, which some people interpret as an economic benefit.
- The reasoning behind marking this as true is that the fallacy highlights how planners may count the monetary value of reconstruction and new purchases without accounting for what else could have been done with those resources. In other words, the economy might look busier after destruction, but wealth is not created from destruction itself; resources are merely redirected from alternative uses into rebuilding.
- The surface claim may seem intuitive: if builders are hired and materials are purchased, someone must be better off. The subtlety, which the fallacy brings out, is that the same resources used for destruction would have produced different goods or services if left intact, so the net effect is not an unequivocal gain to the economy.
- In summary, the statement is true insofar as the fallacy emphasizes that destruction can generate apparent short-term economic activity through rebuilding and the stimulation of related sectors, but this does not imply that destruction is an overall positive for wealth or welfare; it ignores the lost opportunities and the true cost of the damage.
Option: False. 
- If we were to choose False, the argument would be that destruction does not help the economy at all and that the resources used to fix damages could have been invested more productively elsewhere, making destruction a net loss. This view focuses on opportunity costs and long-run welfare rather than the short-term, surface-level stimulus. 
- The contrast helps students understand that the Broken Window Fallacy is about miscounting benefits and costs; the fallacy does not claim destruction is unquestionably beneficial, but rather that it can be misleading to equate rebuilding activity with net economic gain.
- Overall, the true/false assessment hinges on recognizing the fallacy’s core lesson: visible rebuilding activity can obscure the true opportunity costs and thus should not be interpreted as unambiguous economic advantage.

25_4 ECN4010A Economics of Public Policy

The "Broken Window Fallacy" argues that destruction can actually help the economy.

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