Economist Thomas Sowell said, “There are no solutions, only trade-offs.” That wisdom was first introduced by French economist Frédéric Bastiat (1801-1850) in his essay “That Which Is Seen, and That Which Is Not Seen.”
Bastiat was a leading advocate of free markets and free trade in the mid-19th century.
Born June 20, 1801, in the south of France on the Bay of Biscay, he wanted to understand why so many solutions proposed by politicians usually did more harm than good. He called this the “unseen” consequences of government policy.
In his essay, Bastiat presents the “Parable of the Broken Window.” The story examines what happens when a child accidentally breaks a shopkeeper’s window. As everyone sympathizes with the shopkeeper’s tragedy, someone stands up and says, “No, this is a good thing.” Now, the shopkeeper must pay a glazier for a new window. The glazier gets paid for his services. He spends his money on other goods. The economy grows.
Using this logic, one concurs that it was a good thing that the child broke the shopkeeper’s window. Its immediate effect was to circulate money and grow the economy.
Bastiat, in his parable, says, “Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen.”
“It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.”
That spending would have also stimulated the economy, and the shopkeeper would have purchased something he wanted or needed, thus creating unintended consequences for what is unseen.
The broken window did not create new wealth.
“Bad economic policies often focus on what is seen, the visible benefits,” Nick Freitas explains on his podcast The Why Minutes, “while completely ignoring what is unseen, the hidden costs and missed opportunities.”
In 2021 President Joe Biden pushed through the Infrastructure Investment and Jobs Act with bipartisan support.
We were told that this bill would create millions of jobs, on average, two million jobs per year. In addition to creating these jobs, the act was touted as protecting critical labor standards on construction projects, increasing jobs in the clean energy industry—solar, wind, carbon capture, energy transmission—putting pipefitters to work making communities safer, protecting and supporting transit workers, and supporting auto workers.
This was at a cost of $1.2 trillion.
Politicians on both sides of the political aisle do this. This way, when it comes time for re-election, they can go before the voters and show how much good they did for the economy.
This is wrong. Not only is the government inefficient at spending our tax dollars, like the broken window parable it spends money on many things its citizens do not want.
Nobel prize-winning economist Friedrich Hayek credits Bastiat with this important insight: “If we judge economic policy solely by its immediate effects, we will miss all of its unintended and longer-run effects and will undermine economic freedom, which delivers benefits that are not part of anyone’s conscious design.”
Freitas says, “The next time you hear a politician brag about his or her brilliant idea to boost the economy, think like Bastiat, ask what’s being broken, who’s paying for it, what wealth is being quietly destroyed to bring about this proposal because focusing only on the seen is the surest way to make us all poorer while pretending we’re better off.”
If more people understood economics, politicians would succeed in their misguided attempts to solve problems, which all too often waste our money.
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Nick Freitas is a Virginia House of Delegates member, representing District 62. He served in the U.S. Army from 1998 to 2009. To hear more of his views, go to TheWhyMinutes.com.
