Part Six: The Seen and the Unseen

In Intro to Libertarianism on April 9, 2012 at 11:00 am

“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.”

Claude Frédéric Bastiat penned those words in his economic treatise of 1848 What is Seen and What is Not Seen. Bastiat’s essay is essential to the understanding of libertarian economics. The entire work should be read by every student of libertarian thought.

Bring up the name of Bastiat in a conversation with your peers. Ask if they are familiar with his works. It is highly unlikely that his name will be widely recognized or that his philosophies will be readily recalled.

Now, bring up FDR, John Kennedy, Lyndon Johnson, Eisenhower, etc. You will be regaled with a myriad of wonderful public works projects brought to us by the American state.

It is of no coincidence that public schools teach more about the pseudo-economics of Maynard Keynes than they do of Bastiat!

So, what did Bastiat have to say? I’ll summarize the essence of Bastiat’s assertions.

When one considers confiscation of private wealth by the state in order for the state to “produce” a good or service, one must also consider the unseen costs of the confiscation.

Every dollar spent on public projects (the “seen”) must be confiscated from its lawful owner. That owner, no longer enjoys the benefit of the confiscated dollar with which to buy a good or service for the former owner (the “unseen”).

Remember, the state is incapable of producing anything. The state confiscates what is produced by others, pools that booty with the loot of others, and commences to undertake public projects.

Essential to the logic of the state is the belief that the state miraculously “knows best” how to spend your money.

We do not see the watches, clothes, washers, dryers, and other goods that go un-purchased when the state confiscates dollars from their rightful owners. We do see the publicly built bridge, the men working on a new library, a new road, a hospital, or other commodity.

Today, we hear the oft-repeated lie that “government creates jobs”. It is a lie because the government (state) does not create anything. For every job the state creates or for every public position funded, another private sector job is lost.

Let’s look at this from a practical perspective.

The Acme Company produces widgets. The state confiscates $25,000 from Acme as taxes. The legislators were swept into office on promises of job creation. Assume that there is no “government waste” and that 100% of the confiscated wealth will fund one publicly funded janitorial position in a public paying $25,000 per year.

A job was “created”.

However Acme, now $25,000 poorer, cannot hire another worker who would be paid an annual salary of $25,000 to produce more widgets. As a result, fewer widgets get produced and Acme lost the ability to create a $25,000 per year job with its wealth.

Who decided that the widget-producing class is less worthwhile than the public janitor class?

The state.

Remember that the state does not create its own wealth. Therefore, the public janitor must be paid next year, and the year after. The state returns to the well from which it drank to “create” the janitor’s job, the Acme Company, and confiscates another $25,000 with which to pay the state’s janitor.

The result?

Acme Company is again reduced by $25,000 (and in each subsequent year) so the state can pay its janitor. As a result, Acme Company cannot hire a widget-producer this year either. The net loss is now two widget producers.

In a series of debates with a contemporary who asserted the benefits of this kind of wage relocation, Bastiat says:

He says himself that the work of the theaters is just as productive as, just as fruitful as, and not more so than, any other work, which might still be contested; for the best proof that theatrical work is not as productive as other work is that the latter is called upon to subsidize the former.

In 1946, Henry Hazlitt published his Economics in One Lesson. Hazlitt published his book to teach:

The art of economics consists of looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

Hazlitt admonishes his readers, when looking at a publicly built bridge, to see the un-built private projects, the un-hired employees, and the un-purchased goods that constitute the true cost of the public bridge. He tells us to see beyond what our eye perceives.

The philosophy of the state is that the state is more capable than the individual to take on projects. Again we see the fanciful belief that the state is somehow a greater good than the individuals the state rules over. This is entirely contrary to the classical liberal ideal, as articulated by Bastiat:

Their faith is in the legislator, not in mankind. Ours is in mankind, not in the legislator.

Again, we come to the core belief of the libertarian.

The essays of Bastiat and Hazlitt are profound and worthwhile reading. Bastiat’s works are not terribly complex and Hazlitt’s book is a genuine pleasure to read on a sunny day.

Because I fear my paraphrasing of those works will not add to their value, I’ll simply offer up the above teaser and hope that my readers will take time to enjoy them on their own.

[NEXT: Addressing the unfounded fears by state-worshippers that, if America adopts libertarianism, the free market, or libertarian socialism, all manners of plagues will befall it. Among those plagues: the return of monopolies and baron corporations, legalization of child labor and worker abuses, and the plundering of the working class. Afterward, we will compare and contrast state socialism with libertarian socialism.]


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