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jsalvatier comments on Broken window fallacy and economic illiteracy. - Less Wrong
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I think that though your father may not have been familiar with the phrase and the abstract concept of the broken window fallacy, he and most people grasp reasonably well this and many such economic concepts at least in domains where they have decent experience. For example, I doubt very much your father would break some windows on his house to give his friend who happens to be a window installer some work. There are no doubt some domains where more abstract understanding of economic concepts could do quite a bit of good (for example, investing where many more people need to understand why market timing is not a good idea and where people need to learn to invest in index funds rather than actively managed funds), but I don't think they are as broadly needed as you suggest. I say this as someone who would describe himself as an economics aficionado.
Understanding the broken window fallacy doesn't just mean recognizing that you shouldn't break stuff just to give your resources more to do; it means recognizing that a social policy of breaking stuff is stupid, even if it benefits specific people.
Considering how many people support policies isomorphic to breaking windows, with isomorphic justifications, I think it's fair to say must people do commit this fallacy, even if they wouldn't commit a different version of it in a different domain.
Also, there's serious debate at the academic level (that I don't take seriously) about whether it even is a fallacy. Some Keynesians believe (according to Wiki) that breaking windows can alleviate a recession.
(I think this is similar to our earlier debate about whether it's a failing of an economic theory that it regards obviously-stupid policy A as "better than nothing", if it also regards not-obviously-stupid policy A' as "better than A".)
Yes, I agree.
This is why I specified "domains where they have decent experience". My point is that I don't think there's a gigantic need to learn these concepts to improve business practices etc. . I do think there's a gigantic need to learn these concepts to improve public policy and charity (for the reasons given in The Myth of The Rational Voter).
People do a decent job of knowing these things on near topics, but not far topics.