I think it's clear that the destruction of value is simply the destruction of value — the world is a poorer place afterwards.<p>But, it's also obvious that the destruction of value can sometimes lead to increased production of value.<p>Destabilizing a non-optimal state of equilibrium through a destructive act can often result in a much more optimal state of equilibrium.<p>In the canonical example, imagine that the shop is badly kept — that the owner isn't really invested in maintaining it or running it well.<p>His child breaks the window, and he fixes it, and suddenly in contrast with the new pane he sees how shoddy his shop is and decides to get his act together.
President Obama’s Cash for Clunkers program [1] where used cars in good condition were destroyed to increase sales of new cars seems to have been based on the broken window fallacy.<p>[1] <a href="https://en.m.wikipedia.org/wiki/Car_Allowance_Rebate_System" rel="nofollow noreferrer">https://en.m.wikipedia.org/wiki/Car_Allowance_Rebate_System</a>
Broken windows can be a net benefit, for example the london neighborhoods hit by bombs during world war 2 are now far denser and more economically active. The idea that broken windows are always negative is as simplistic as the idea that they are always positive.
I wonder if entertainment could be analogous to destruction? Like, do Taylor Swift concerts actually generate useful economic activity, or is it a broken window? Presumably those concert goers would have spent that money on something more useful..
So the argument is that breaking a shopkeeper's window never makes sense even though it creates business opportunities for glaziers because the money the shopkeeper must spend on repairing their window could be spent on something else. Makes sense. But what if that something else is buying a prostitute, gambling or "investing" in stocks (i.e giving money to banks)? Maybe paying kids to break windows to create jobs for glaziers could be "good for the economy". At least sometimes.