The story of the broken window
Once upon a time there was a shopkeeper named John, who owned a little shop in town.
One day, a teenager threw a brick through the shopkeeper’s window, shattering the glass. (Distribute small, clear glass “stones” to the audience. These represent a piece of a broken window, which will help them remember this lesson.)
This destroys the window, but the townspeople begin to think that it is not all bad. Maybe the teenager should be considered to be a hero, because now the shopkeeper will have to buy a new window, which will give business to the window company and thereby create jobs and boost the local economy.
But John is not so happy about the situation. In order to understand the situation, we have to think about what is not seen. If John did not have to spend his money to replace the broken window, he would have spent it on braces for his child’s teeth, which also would have created jobs. Also, if the window had not been broken, John would have had both the window and the braces. Instead, as it is now, he has only the window.
Thus, breaking the window made the overall economy worse off than it was before, not better off.
This lesson also should be remembered when we think about government projects, which are said to improve the economy and to create jobs. When the government spends taxpayer money on shovel ready jobs or other job creating projects, it is taking money that the taxpayers otherwise would have spent on something else they wanted, which also would have created jobs. So we often forget to consider the opportunities that were lost because the taxpayer was not able to spend his own money as he wanted. Maybe that explains why the government’s “stimulus” plans don’t create the jobs that were promised, since they also are destroying jobs in the process.
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