Narrator: A young hoodlum hurls a brick through a baker’s shop window. A crowd gathers, and soon a consensus forms: the broken window, while unfortunate for the baker, is actually a good thing for the town. It will create business for the glazier, who will then have more money to spend with other merchants, creating a ripple of economic benefit. It seems like a simple, logical observation. But what if this common-sense conclusion is completely wrong? What if, by focusing only on the glazier’s new business, the crowd is missing a crucial, unseen part of the picture?

This is the central puzzle explored in Henry Hazlitt's enduring classic, Economics in One Lesson. Hazlitt argues that the entire field of economics can be reduced to a single, powerful principle: the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups. The book is a masterclass in dissecting the persistent fallacies that arise from ignoring this one lesson, fallacies that continue to shape and often damage public policy to this day.

Narrator: The most persistent fallacy in economics is the belief that destruction can create prosperity. Hazlitt illustrates this with the simple story of the broken window. When the hoodlum breaks the baker’s window, the crowd sees only the immediate benefit. The baker must pay a glazier, say $250, to replace the window. The crowd concludes that this creates work for the glazier, who will then spend that $250, benefiting other businesses. This is what is seen.

What is unseen, however, is what the baker would have done with that $250 had the window never been broken. Perhaps he was planning to buy a new suit from the local tailor. Now, that money goes to the glazier instead. The glazier’s gain of business is simply the tailor’s loss of business. No new net employment has been created. The town as a whole is not richer; in fact, it is poorer by one window. The baker, who would have had both a window and a new suit, now only has a window. The community has lost the value of a new suit that was never made. This fallacy, in a hundred disguises, underpins arguments that war and natural disasters are good for the economy, by confusing the need for rebuilding with a net creation of wealth.

Narrator: Governments often justify massive spending projects, like building a bridge, on the grounds that they "create jobs." This argument is merely the broken window fallacy on a grander scale. When a government announces it will spend, for example, $10 million on a bridge, it is easy to see the jobs created for the construction workers. The bridge stands as a visible testament to the government's action.

But what is unseen are the jobs that were destroyed to pay for it. That $10 million is not created from thin air; it is taken from taxpayers. For every dollar spent on the bridge, a taxpayer has one less dollar to spend on things they would have otherwise bought—a new car, a home renovation, or clothes. For every public job created on the bridge, a private job has been destroyed somewhere else. The country is not richer by one bridge; it has a bridge at the expense of the cars, homes, and other goods that were never produced because the capital was diverted. The only justification for a public works project is its genuine necessity—that it serves a vital public need that would not be met by private enterprise—not its ability to provide employment.

Narrator: One of the oldest economic fears is that machines create unemployment. This belief has fueled resistance to technological progress for centuries, from the Luddites who smashed stocking frames in 19th-century England to modern-day unions that enforce "make-work" rules. The fallacy lies in focusing only on the immediate displacement of workers in a specific industry.

Hazlitt explains that the real purpose of technology is to increase production and raise the standard of living. When an employer invests in a machine that allows one worker to do the work of two, the displaced worker is a visible consequence. But the unseen consequences are far more significant. The employer can use the cost savings in one of three ways: expand the business by hiring more people in other roles, invest the capital in a different industry, or pass the savings to consumers through lower prices. If prices fall, consumers have more money to spend on other goods, which stimulates production and creates jobs in other sectors. History shows this to be true. When Arkwright invented his cotton-spinning machinery in 1760, there were 7,900 workers in the industry. By 1787, after widespread adoption of the machinery, that number had grown to 320,000. Machines do not, on net balance, destroy jobs; they rearrange them and, by increasing productivity, make society as a whole wealthier.

Narrator: The argument for protective tariffs follows the same flawed logic. A government may impose a tariff on imported sweaters to "protect" a domestic sweater industry from foreign competition. The visible effect is that the domestic company may stay in business, and its workers keep their jobs.

The unseen effects, however, are far more damaging. The tariff forces American consumers to pay more for sweaters than they otherwise would. That extra money they spend on a protected sweater is money they can no longer spend on other goods and services, leading to job losses in other, more efficient industries. Furthermore, the tariff harms American exporters. If British manufacturers cannot sell their sweaters in America, they do not earn the dollars they need to buy American goods. The result is that American export industries shrink. The tariff does not create net employment; it merely diverts labor and capital from efficient industries where America has an advantage to inefficient ones where it does not. The country's overall production is reduced, and real wages fall because workers and consumers have less purchasing power.

Narrator: Perhaps the most seductive fallacy is the idea that prosperity can be created by simply printing more money. Inflation's appeal rests on the confusion of money with wealth. Real wealth is what money can buy: the goods and services we produce. Printing more money does not create more goods; it only reduces the value of each dollar.

Inflation is a hidden and often cruel tax. When a government prints money to pay its bills, the first groups to receive the new money—for instance, government contractors—benefit. Their incomes rise before the prices of the goods they buy have fully adjusted. But as this new money spreads through the economy, it bids up prices for everyone else. The last groups to receive the money, such as those on fixed incomes or with lagging wages, find that their cost of living has increased before their income has. They are made poorer. Inflation distorts production by encouraging speculation over prudent investment, and it punishes thrift by eroding the value of savings. It is not a path to wealth but a "mirage" that ultimately leads to economic instability and hardship.

Narrator: The single most important takeaway from Economics in One Lesson is that sound economic thinking requires us to look beyond the immediate and the obvious. It demands that we trace the long-run consequences of any policy and consider its effects not just on a single, favored group, but on all members of society. The persistent fallacies of economics—from the broken window to the supposed benefits of tariffs and inflation—all stem from the failure to do this, from focusing on the seen while ignoring the unseen.

Hazlitt’s lesson is a powerful tool for critical thinking that remains profoundly relevant. The next time you hear a proposal to "create jobs" through government spending, or to "protect" an industry from competition, ask yourself: Who is seen, and who is the forgotten person paying the price? By applying this simple yet powerful lens, we can begin to distinguish between policies that create genuine prosperity and those that, despite their good intentions, only lead to a poorer and less free society for everyone.