Economics in One Lesson

This chapter consists entirely of an example to emphasize how people may easily overlook unseen factors in economics.

The story begins with a vendor whose shop window was broken by a brick. Some people may argue that, despite the vendor’s inconvenience in having to spend $50 to replace it, the economy is not worse off, as the glazier now gains business. This net loss for the vendor is a net gain for the glazier, who will circulate that money again when making a purchase of his own.

Hazlitt argues that this is, however, a fallacious stream of reasoning. While it is true that the glazier gains business, it could be at the detriment of a tailor. People might ask, “what tailor?” and this question itself perfectly illustrates their incomplete reasoning: The vendor could have used that $50 to order a new suit, but with his window broken, he can now only afford one of the two purchases. Hazlitt thus reasons that people fail to consider the position of the tailor because he is not glaringly visible in the equation; his loss of business is an invisible cost.

In sum, while the glazier made a net gain of $50, the community is not the richer, for the