Friday, September 16, 2011

Things Seen and Unseen

I am familiar with the Broken Windows fallacy, but until this morning I had not read the essay from which comes, an 1850 essay by Frenchman Frédéric Bastiat. Wikipedia prints the full essay here, but a perhaps more readable version is here. It begins:

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.

The essay has a number of subsections: the Broken Window; the Disbanding of Troops; Taxes; Theatres, Fine Arts; Public Works; the Intermediates; Restrictions; Machinery; Credit; Algeria; Frugality and Luxury; and He Who Has a Right to Work Has a Right to Profit.

I'm not an economist, but this sounds like good argument as to why many government economic measures don't work, particularly public works spending and tariffs.

I found the essay very interesting and worth the time it took to read. I'd be interested in looking at articles debunking Bastiat's thoughts.

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