I came across this concept as a part of our Macroeconomics course. I found this one quite interesting as it helps us weigh economic arguments... The parable is as follows:
A little boy breaks a shopkeeper's window. Everyone sympathizes with the man whose window was broken, but pretty soon they start to suggest that the broken window makes work for the repairman, who will then buy bread, benefiting the baker, who will then buy shoes, benefiting the cobbler, etc. Finally, the onlookers conclude that the little boy was not guilty of vandalism; instead he was a public benefactor, creating economic benefits for everyone in town.
The fallacy in the argument is, had the shopkeeper not spent his money on repairing his window, he would have spent it on the new suit he was saving to buy. The broken window didn't create net new spending, it just diverted spending from somewhere else.
People see the activity that takes place but they don't see the activity that would have taken place.
Most of us claim that we are extremely busy and that we do not find time for anything. Taking this logic forward, it would do good if we pause and ask ourselves, are we "productive" or just plain "busy"?
