Should you pee on the urinal cake? (The broken window fallacy)

3 min read

The idea for this article came from the most unexpected place, a 'men's health' article (and later Tim Harford's series called 'Dear Economist'). Don't ask me why I was reading that. So this dude from someplace went to a pub and had a little too much beer and wanted to use the washroom. But it is not that simple anymore, nothing in life is. If he does pee on the urinal cake he would be contributing towards finishing it. Which would mean that the owner of the pub would have to buy more and in turn help the economy. Simple right? No. He then realized that if the owner of the pub had to buy more tablets he would eventually increase the prices of his beloved beer which would be heartbreaking. So he decided to do the most logical thing of all - write a letter to an economist asking for the solution to his problem. He wrote to Tim Harford - Economist and Author to tell him where to pee in a pub. In this article, we explore and elaborate the answer that he got from this entire process.

The Fallacy

This can somewhat be explained through a concept called the 'broken window fallacy' - if money is used to repair things instead of purchase of new products and services there can be unforeseen negative consequences of the same. The theory was formulated by the 19th century French Economist Frederic Bastiat when a boy broke a window in his home and the entire village passed judgment that this act is to be seen noble because as a consequence of this act the boy's father would now pay the glazier (guy who repairs windows and doors for a living) to fix the window which would eventually boost the wealth of all of the village. This is where Frederic Bastiat came in. He simply said the money that the father pays for the repair of the window cannot be used for anything else anymore. So yes, the glazier is richer than he was but the father is poorer.

The meaning

The broken window reduces the disposable income for the father and also keeps him busy for a while - the time and money he could have used to put to something else. Also, repairing the broken window does not add any new products to the market. Rather breaking of a window should be seen as a loss of resources. What the fallacy explains is that a repairing event can have negative ripples as well to the economy. Sure, there is a boost in one part of the economy but the event can lead to losses in other parts and sectors of the economy - directly or indirectly. There is also a behavioral aspect of the theory or the story used to explain the theory. The entire village overlooks the adversity caused to the father-son because of the lucky glazier who made money for repairing something that was already paid for. This money and time could well be used in increasing productivity of their own business by the father-son duo.

The ‘war’ analogy

The most famous analogy of the concept is the one used to explain the effects of wars. Several lobbyists have often made the argument that war creates jobs for millions of people through direct (weapons, defense and healthcare) or indirect (construction, security, export/import) routes. The broken window fallacy, however, contradicts this argument with one of its own. The fallacy suggests that instead of producing new goods that would be helpful to the economy the money is redirected for the manufacture and purchase of weapon systems and later towards the repair of the aftershocks of the war on the economy. These costs are maintenance costs and do not add to the economy as significantly as creation of new products would have.

Conclusion

Tim Harford in response to the letter and in accordance to what is explained in the article above told the madly patient guy who had to pee that he wasn't helping anyone by peeing on the urinal cake in front of him and definitely should not consider aiming at the urinal cake in front of someone else! So, the moral of the story is that I am still not sure where the guy should have done his business.