TOLFA Segment 15, Question 1

A hooligan with no understanding of economics nor desire for freedom hurls a brick through a shop window in Seattle that he passes while in an angry demonstration against free trade.

Repairs cost $1,000 and obviously the glazier and all upon whom he spends the $1,000 that he receives are very happy. So does the broken window generate prosperity in Seattle? Why, or why not?

Certainly! The glazier spends his $1,000 on glass and supplies ($100) and help ($100) and running his truck that day ($50) and lunch ($15) and advertising ($35) and his mortgage and home upkeep ($200) and on a whole bunch of other pleasant or useful items ($500) and all those recipients circulate the unexpected money throughout Seattle and so the whole community gains. The demonstrator was a benefactor, not a hooligan.
It cannot possibly be so, for if it were, prosperity could be created by breaking more windows.
At day's end the shopkeeper had a good window. If it had never been broken he'd have had a good window plus $1,000. All the incident did was to transfer the $1,000 from the shopkeeper to the people patronized by the glazier; no new wealth at all was created.

Don't hurry away; even when you've got the right answer, try clicking on the others to see why they are wrong! Then when you have correctly answered this make notes in your student notebook, go to Question 2.

Segment 15 Page