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The Seen And The Unseen

Bastiat on “The seen and the unseen” 

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.
 There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
 Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.

                                    Frederic Bastiat, Selected Essays On Political Economy 1848

  Henry Hazlitt explains:

A certain amount of public spending is necessary to
perform essential government functions. A certain amount
of public works of streets and roads and bridges and
tunnels, of armories and navy yards, of buildings to
house legislatures, police and fire departments-is neces-
sary to supply essential public services, With such public
works, necessary for their own sake, and defended on that
ground alone, l am not here concerned. I am here con-
cerned with public works considered as a means of “pro-
viding employment” or of adding wealth to the com-
munity that it would not otherwise have had.
A bridge is built. If it is built to meet an insistent
public demand, if it solves a traffic problem or a trans-
portation problem otherwise insoluble, if, in short, it is
even more necessary than the things for which the tax~
payers would have spent their money if it had not been
taxed away from them, there can be no objection. But
a bridge built primarily “to provide employment” is a
different kind of bridge. When providing employment be-
comes the end, need becomes a subordinate consideration.
“Projects” have to be invented. Instead of thinking only
where bridges must be built, the government spenders
begin to ask themselves where bridges can be built. Can
they think of plausible reasons why an additional bridge
should connect Easton and Weston? lt soon becomes ab-
solutely essential. Those who doubt the necessity are
dismissed as obstructionists and reactionaries.
Two arguments are put forward for the bridge, one
of which is mainly heard before it is built, the other of
which is mainly heard after it has been completed. The
first argument is that it will provide employment. It will
provide, say, 500 jobs for a year. The implication is that
these are jobs that would not otherwise have come into
This is what is immediately seen. But if we have trained
ourselves to look beyond immediate to secondary conse-
quences, and beyond those who are directly benefited by a
government project to others who are indirectly affected,
a different picture presents itself. It is true that a par-
ticular group of bridgeworkers may receive more em-
ployment than otherwise. But the bridge has to be paid
for out of taxes. For every dollar that is spent on the
bridge a dollar will be taken away from taxpayers. If the
bridge costs $1,000,000 the taxpayers will lose $1,000,000.
 They will have that much taken away from them
which they would otherwise have spent on the things
they needed most.
Therefore for every public job created by the bridge
project a private job has been destroyed somewhere else.
We can see the men employed on the bridge. We can
watch them at work. The employment argument of the
government spenders becomes vivid, and probably for
most people convincing. But there are other things that
we do not see, because, alas, they have never been per­
mitted to come into existence. They are the jobs destroyed
by the $1,000,000 taken from the taxpayers. All that has
happened, at best, is that there has been a diversion of
jobs because of the project. More bridge builders; fewer
automobile workers, radio technicians, clothing workers,
– But then we come to the second argument. The bridge
exists. lt is, let us suppose, a beautiful and not an ugly
bridge. It has come into being through the magic of gov-
ernrnent spending. Where would it have been if the ob-
structionists and the reactionaries had had their way?
There would have been no bridge. The country would
have been just that much poorer.
Here again the government spenders have the better of
the argument with all those who cannot see beyond the
immediate range of their physical eyes. They can see the
bridge. But if they have taught themselves to look for
indirect as well as direct consequences they can once
more see in the eye of imagination the possibilities that
have never been allowed to come into existence. They
can see the unbuilt homes, the unmade cars and radios,
the unmade dresses and coats, perhaps the unsold and
ungrown foodstuffs. To see these uncreated things re-
quires a kind of imagination that not many people have.
We can think of these non-existent objects once, perhaps,
but we cannot keep them before our minds as we can the
bridge that we pass every working day. What has hap-
pened is merely that one thing bas been created instead
of others.
The same reasoning applies, of course, to every other
form of public work. It applies just as well, for example,
to the erection with public funds of housing for people
of low incomes, All that happens is that money is taken
away through taxes from families of higher income (and
perhaps a little from families of even lower income) to
force them to subsidize these selected families with low
incomes and enable them to live in better housing for the
same rent or for lower rent than previously.
I do not intend to enter here into all the pros and cons
of public housing. I am concerned only to point out the
error in two of the arguments most frequently put for-
ward in favor of public housing. One is the argument
that it “creates employment”; the other that it creates
wealth which would not otherwise have been produced.
Both of these arguments are false, because they overlook
what is lost through taxation. Taxation for public housing
destroys as many jobs in other lines as it creates in
housing. It also results in unbuilt private homes, in un-
made washing machines and refrigerators, and in lack of
innumerable other commodities and services.
And none of this is answered by the sort of reply which
points out, for example, that public housing does not have
to be financed by a lump sum capital appropriation, but
merely by annual rent subsidies. This simply means that
the cost is spread over many years instead of being con-
centrated in one. It also means that what is taken from
the taxpayers is spread over many years instead of being
concentrated into one. Such technicalities are irrelevant
to the main point.
The great psychological advantage of the public hous-
ing advocates is that men are seen at work on the houses
when they are going up, and the houses are seen when
they are finished. People live in them, and proudly show
their friends through the rooms. The jobs destroyed by
the taxes for the housing are not seen, nor are the goods
and services that were never made. It takes a concentrated
effort of thought, and a new effort each time the houses
and the happy people in them are seen, to think of the
wealth that was not created instead. Is it surprising that
the champions of public housing should dismiss this, if
it is brought to their attention, as a world of imagination,
as the objections of pure theory, while they point to the
public housing that exists? As a character in Bernard
Shaw’s Saint Joan replies when told of the theory of
Pythagoras that the earth is round and revolves around
the sun: “What an utter fool! Couldn’t he use his eyes?”
                                      Henry Hazlitt, Economics In One Lesson 1946
Please remember this when you see our new street lights, sidewalks, and especially the new 9th Ave Pier.

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