Common Sense For New Hampshire

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

existence.

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,

farmers.

– 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

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