A mischievous teenager throws a brick into a baker's window, as it goes. A crowd forms and a person suggests a silver lining to the situation "Now the baker will have to spend the money to have the window repaired. This will add to the income of the repairman, who will spend his additional income, which will add to another seller's income, and so forth". You know that the spending will multiply and generate higher income and employment.
However, that's just what people think happens.
If the baker did not spend his money fixing the window, he would have spent it on the new suit he was saving up for. The tailor would have got that additional income, and so forth.
People only see the activity that took place, the broken window, and not the activity that would have taken place, the new suit. The net spending hasn't changed it just diverted the spending somewhere else.
Source: The Dismal Science? Hardly! by Robert D. McTeer, Jr. from the book Principles of Economics.
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So don't throw bricks into baker's windows anymore? I thought I was helping the economy all this time...
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