That Which Is Seen and that Which Is Not Seen

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The Root of Liberty Discussion –  “That Which is Seen, and That Which is Not Seen”

Written by: Frédéric Bastiat

First published in 1848

Excerpts from the Introduction, by Frédéric Bastiat

In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause — it is seen. The others unfold in succession — they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference — the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favorable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, — at the risk of a small present evil.

And if that which is not seen is taken into consideration, because it is a negative fact, as well as that which is seen, because it is a positive fact, it will be understood that neither industry in general, nor the sum total of national labor, is affected, whether windows are broken or not.

Fundamental Concepts

Foresight 

Foresight is the ability to predict what will happen in the future based on observations of current actions.

In 1946 Henry Hazlitt wrote “Economics in One Lesson” a book intended to be a modernization, extension, and generalization of the approach by Frédéric Bastiat in “That Which is Seen, and That Which is Not Seen”.  In the first chapter of “Economics in One Lesson” titled “The Lesson” Hazlitt explains why economists must employ foresight:

“Unfortunately, the persistent tendency of men is to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.”

“In this lies almost the whole difference between good economics and bad. The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.”

Therefore: A skilled economist considers the far-reaching, indirect outcomes and evaluates their impact on all groups over an extended period.

The Forgotten Man

In the section “The Broken Window”, Bastiat says: “The reader must take care to remember that there are not two persons only, but three concerned in the little scene which I have submitted to his attention. One of them, James B., represents the consumer, reduced, by an act of destruction, to one enjoyment instead of two. Another under the title of the glazier, shows us the producer, whose trade is encouraged by the accident. The third is the shoemaker (or some other tradesman), whose labor suffers proportionably by the same cause. It is this third person who is always kept in the shade, and who, personating that which is not seen, is a necessary element of the problem.”

This concept was the basis for William Graham Sumner’s 1883 essay “The Forgotten Man.”

Opportunity Cost

Opportunity costs represent the potential benefits that an individual, investor, or business misses out on when choosing one alternative over another.

In the section “The Broken Window”, Bastiat uses the example of a shopkeeper who decides to hire a glazier to repair a broken window. The visible consequence of this decision is that the window is fixed, and the glazier earns money. However, the invisible consequence is the other goods and services that the shopkeeper could have purchased with the money he paid the glazier, had the window not been broken. The opportunity cost of hiring the glazier is the value of the other goods and services that the shopkeeper could have acquired but did not.

Bastiat also explores the concept of opportunity cost in the section "The Disbanding of Troops," in which he argues that the true cost of keeping soldiers in peacetime is not only the visible expense of paying their wages, but also the opportunity cost of the goods and services that could have been produced if the soldiers had been employed in other industries.

Regulation

In the section “The Broken Window”, Bastiat says: “It is this third person who is always kept in the shade, and who, personating that which is not seen, is a necessary element of the problem. It is he who shows us how absurd it is to think we see a profit in an act of destruction. It is he who will soon teach us that it is not less absurd to see a profit in a restriction, which is, after all, nothing else than a partial destruction.”  In this passage Bastiat uses the term restriction to describe government regulation.  Bastiat equates government regulation to a partial destruction of economic activity.

Taxation

In the section “Taxes”, Bastiat says:

“You compare the nation, perhaps, to a parched tract of land, and the tax to a fertilizing rain. Be it so. But you ought also to ask yourself where are the sources of this rain and whether it is not the tax itself which draws away the moisture from the ground and dries it up?”

“But when James B. gives a hundred sous to a Government officer, and receives nothing for them unless it be annoyances, he might as well give them to a thief. It is nonsense to say that the Government officer will spend these hundred sous to the great profit of national labor; the thief would do the same; and so would James B., if he had not been stopped on the road by the extra-legal parasite, nor by the lawful sponger.”

Subsidy

In the section “Theatres and Fine Arts”, Bastiat says:

“But, by a deduction as false as it is unjust, do you know what economists are accused of? It is, that when we disapprove of Government support, we are supposed to disapprove of the thing itself whose support is discussed; and to be the enemies of every kind of activity, because we desire to see those activities, on the one hand free, and on the other seeking their own reward in themselves. Thus, if we think that the State should not interfere by taxation in religious affairs, we are atheists. If we think the State ought not to interfere by taxation in education, we are hostile to knowledge. If we say that the State ought not by taxation to give a fictitious value to land, or to any particular branch of industry, we are enemies to property and labor. If we think that the State ought not to support artists, we are barbarians who look upon the arts as useless.”

“Against such conclusions as these I protest with all my strength. Far from entertaining the absurd idea of doing away with religion, education, property, labor, and the arts, when we say that the State ought to protect the free development of all these kinds of human activity, without helping some of them at the expense of others, — we think, on the contrary, that all these living powers of society would develop themselves more harmoniously under the influence of liberty; and that, under such an influence no one of them would, as is now the case, be a source of trouble, of abuses, of tyranny, and disorder.”

“Our adversaries consider that an activity which is neither aided by supplies, nor regulated by Government, is an activity destroyed. We think just the contrary. Their faith is in the legislator, not in mankind; ours is in mankind, not in the legislator.”

Protectionism

In the section “The Broken Window”, Bastiat says: “When we arrive at this unexpected conclusion: "Society loses the value of things which are uselessly destroyed;" and we must assent to a maxim which will make the hair of protectionists stand on end — To break, to spoil, to waste, is not to encourage national labor; or, more briefly, destruction is not profit.”

In this passage Bastiat refers to protectionists and is comparing protectionist legislation to waste and destruction.

Credit

In the section “Credit”, Bastiat says: “It is absolutely necessary in this question to forget money, coin, bills, and the other instruments by means of which productions pass from hand to hand; our business is with the productions themselves, which are the real objects of the loan; for when a farmer borrows fifty francs to buy a plough, it is not, in reality, the fifty francs which are lent to him, but the plough: and when a merchant borrows 20,000 francs to purchase a house, it is not the 20,000 francs which he owes, but the house. Money only appears for the sake of facilitating the arrangements between the parties.”

Colonialism

In the section “Algeria”, Bastiat says: “Much is hoped from the future prosperity of Algeria; be it so. But the drain to which France is being subjected ought not to be kept entirely out of sight. The commerce of Marseilles is pointed out to me; but if this is to be brought about by means of taxation, I shall always show that an equal commerce is destroyed thereby in other parts of the country.”

Savings

In the section “Frugality and Luxury”, Bastiat says:

"To save, is to spend."

“What is Aristus's object in saving 10,000 francs? Is it to bury them in his garden? No, certainly; he intends to increase his capital and his income; consequently, this money, instead of being employed upon his own personal gratification, is used for buying land, a house, &c., or it is placed in the hands of a merchant or a banker. Follow the progress of this money in any one of these cases, and you will be convinced, that through the medium of vendors or lenders, it is encouraging labor quite as certainly as if Aristus, following the example of his brother, had exchanged it for furniture, jewels, and horses.”

Study Questions

1. Why should an economist consider the far-reaching, indirect outcomes and evaluate their impact on all groups over an extended period?

2. What role does the economic concept of scarcity play in this essay?

3. How does a subsidy impact the production efficiency of goods and services?

4. How does Bastiat’s statement "To save, is to spend" relate to Say’s Law?