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Archives: Opinion
Updated: Saturday, July 3, 2004 6:17 PM EDT

The seen…and the unseen

Getting a glimpse of the future is one of the most coveted commodities sought by humans. It's also one of the most elusive.

Politicians often crow about the potential impact of their legislation and expensive programs. Yet how can our elected officials possibly know that laws enacted today will actually save Social Security or ensure that no child is left behind at schools across Northern Kentucky?

"In the department of economy, an act … gives birth not to an effect, but a series of effects," wrote Frederic Bastiat in an 1850 essay entitled, "That which is seen, and that which is not seen."

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Bastiat, a French economist and philosopher, uses a broken shop window to demonstrate the unseen n and often unintended n consequences of today's decisions on the future economy.

Suppose that a window is carelessly broken in a retailer's business, and the shopkeeper must pay $20 to have it repaired. This much is easily seen.

The casual observer might conclude that breaking windows benefits the economy by providing work for window-repairers, causing money to circulate and ultimately encouraging business activity. Again, this captures what is seen but ignores that which is not.

For while a broken window advances a repairer's trade, it actually decreases the amount of money the shop owner has available to spend for his own benefit. For example, if he did not have to repair the window, the shop owner would have more money to spend at another retailer, perhaps for a new pair of shoes.

What is unseen reveals potentially more players in this little drama than the shopkeeper and repairer. Had the glass not been broken, an additional $20 would have ended up at the shoe store, grocer or in the shopkeeper's bank account.

With the broken window to replace, our unfortunate shopkeeper is $20 leaner and winds up with nothing more than he had to begin with n a complete and secure shop. Had it not been broken, he also could have had the enjoyment of a new pair of shoes and an unbroken window. Thus, the greater net benefit to himself and society is found when the window is left whole.

The ripple effect gleaned from thinking through the unintended consequences of Bastiat's broken window can be applied to virtually every public policy issue under consideration in Northern Kentucky. Unintended consequences are always present, but often are under-stated or simply ignored.

Sensitive decisions n whether in national politics or personal circumstances n often reveal emotional intentions followed by harsh realities.

Early in his administration, President Bush signed legislation imposing new tariffs on imported steel. Bush's intention was to protect steel-workers' jobs from "unfair" foreign competition by equalizing foreign and domestic prices. This was easily seen n and insisted upon n by the nation's steel producers.

But the policy had unintended yet very harmful consequences. It damaged companies that manufactured goods from steel and had a negative effect on employment. For each job that produces raw steel, there are about 20 jobs that use steel as an input.

As a result, this policy harmed 20 times the number of workers that it helped. Furthermore, customers paid more for everything from automobiles and washing machines to filing cabinets and other products made with steel.

The consequences of well-intended policy are often not considered unless such decisions are viewed through the eyes of foresight.

"One of the benefits of studying economics is a deeper understanding of our own situation as acting humans," suggests Gene Callahan in his book "Economics for Real People." "For instance, people often fail to properly account for the cost of their choices."

Gaining the eagle-eye of foresight leads to sound decision-making, and is mostly attained through experience. Unfortunately, the rough hand of life's experiences yields misfortune, dismay and can be costly.

But is there a way for us to obtain this insight now, possibly avoiding some of the pain that experience inflicts in such an unpleasant manner?

That is the purpose of our column.

While policymakers love to wax eloquently about the merits of a multitude of taxpayer-funded projects, we seek to arm regular readers with the highly valuable perspective that emerges from an enhanced understanding of sound economics. With this tool of science, the unintended consequences of government's good intentions can become as clear as Bastiat's unbroken window.

In coming weeks, we will explore various policies and situations important to the citizens of Northern Kentucky, including education, transportation, taxation, the environment, urban growth and more. We hope our readers will participate in the process by providing ideas, concerns, refutations or rebuttals to us at or by calling us at .

Posted July 4, 2004

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