Why breaking things is not profitable (wars, destroyed production, repair costs) : stocks


It has come to my attention that at least some users here don’t understand why the broken window fallacy is a fallacy. For those who have been misled into thinking war is somehow good for the economy it is time to take a reading field trip to Investopedia.com

When money and productivity have to be spent to replace things or repair something that should already be working then they are lost. That money is not creating something new or invesing in the future. If that thing that is broken or needs replacement was intentionally damaged then that is a cost and not an investment.

If suddenly Amazon warehouses spontaneously ignite and need to be repaired that is not a benefit to AMZN nor the American economy nor the world economy. If someone went around destroying delivery trucks around AMZN distribution centers that would not be creating jobs for the economy and would not be adding to anyone or anything it would be reducing overall productivity. Instead of AMZN expanding distribution it is delayed while trying to fix what it already had.

The broken window fallacy argues that there is no economic gain from fixing the destruction caused by a certain event. Even though capital will be spent to repair any damages, that is only a maintenance cost that does not spur the economy in the long run, as it is not a true increase in economic output. The money and time spent on repairing damages could be spent on more productive goods and services. In war, resources are diverted to creating weapons as opposed to using those resources to invest in areas that could increase actual economic output.

https://www.investopedia.com/ask/answers/08/broken-window-fallacy.asp



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