James d. Gwartney

Video:
The Invisible Hand

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56
Unintended Consequences Create
Problems
In 1946, Henry Hazlitt, a famous economic journalist, wrote a book titled Economics in One
Lesson. This economics primer, which builds on the 1850 essay by the Frenchman Frédéric
Bastiat (whose work was discussed in Element 1.9), is perhaps the all-time bestselling treatise
in economics.
Recall Bastiat’s story of a young boy who breaks the window of a shopkeeper by
throwing a ball through it. As a result, the shopkeeper hires a glazier to fix the window. Some
observers, noting the highly visible employment of the glazer, argue that the broken window is
a good thing because it created a job for the glazier. However, as Hazlitt stresses, this is wrong
because it ignores the secondary effects.
If the shopkeeper had not spent money fixing the window, he would have spent it on
other things, perhaps a pair of shoes, new clothes, or similar items. If the window had not been
broken, employment in these other areas of production would have been greater and the
community would have had both the window and the items purchased by the shopkeeper. Once
the secondary effects are considered, it is clear that destruction resulting from floods,
hurricanes, and badly designed public policy harm a society and fail to expand net
employment. The view that replacing destruction creates employment and is good for the
economy is now known as the “broken window fallacy.” The resources used in such
replacement must reduce a society’s ability to produce other valuable goods or services. See
Element 1.9 for several examples of this fallacious view.
Hazlitt’s one lesson was that when analyzing an economic proposal, a person:
…must trace not merely the immediate results but the results in the long run, not
merely the primary consequences but the secondary consequences, and not