Broken window fallacy and economic illiteracy.

Some time ago, I had a talk with my father where I ex­plained to him the con­cept of the bro­ken win­dow fal­lacy. The idea was com­pletely novel to him, and while it didn’t take long for him to grasp the prin­ci­ples, he still needed my help in com­ing up with ex­am­ples of ways that it ap­plies to the mar­ket in the real world.

My father has an MBA from Columbia Univer­sity and has held VP po­si­tions at mul­ti­ple mar­ket­ing firms.

I am not re­motely ex­pert on eco­nomics; I do not even con­sider my­self an afi­cionado. But it has fre­quently been my ob­ser­va­tion that not just av­er­age cit­i­zens, but peo­ple whose po­si­tions have given them ev­ery rea­son to learn and use the in­for­ma­tion, are crit­i­cally ig­no­rant of ba­sic eco­nomic prin­ci­ples. It feels like watch­ing en­g­ineers try to pro­duce func­tional de­signs based on Aris­totelian physics. You can­not ra­tio­nally pur­sue self in­ter­est when your map does not cor­re­spond to the ter­ri­tory.

I sup­pose the worst thing for me to hear at this point is that there is some rea­son with which I am not yet fa­mil­iar which pre­vents this from hav­ing grand scale detri­men­tal effects on the econ­omy, since it would im­ply that busi­nesses can­not be made more sane by the in­creased dis­sem­i­na­tion of ba­sic eco­nomic in­for­ma­tion. Other­wise, this seems like a fairly im­por­tant av­enue to ad­dress, since the ba­sic stan­dards for eco­nomic ed­u­ca­tion, in ed­u­cated busi­ness­peo­ple and the gen­eral pub­lic, are so low that I doubt the ed­u­ca­tional sys­tem has even be­gun to climb the slope of diminish­ing re­turns on effort in­vested into it.