Frédéric Bastiat was a prolific French economist and political philosopher who lived from 1801 to 1850. In his relatively short lifetime, he published dozens of books and essays covering a litany of economic and political issues, ranging from socialism to free trade. As a vigorous and passionate defender of liberty and freedom, he vehemently opposed his country’s economic trajectory toward socialism, and any and all policies that, as he understood it, encroached on the liberties and freedoms of his fellow citizens.
Of the many essays he composed, one in particular has become very popular among conservatives and libertarians, called, “That Which Is Seen, and That Which Is Not Seen: The Unintended Consequences of Government Spending.” In this essay, he observes something that is very much ubiquitous in the field of economics and a staple of human nature. He observes that the result of every economic policy contains two parts: the part that is seen and visible to the naked eye – or the short-term consequences – and the other that is unseen and relatively invisible to the naked eye – or the long-term consequences. Human nature tends to only consider the short-term consequences of a policy and ignore the long-term consequences, and it’s almost always the case that when the short-term effects are positive, the long-term effects are negative, and vice-versa.
Bastiat offers a number of examples to demonstrate this point, one of which has been dubbed the Broken Window Fallacy. In this section of his essay, Bastiat underscores the idiocy of breaking stuff to spur economic activity, a belief that, as he notes, was very pervasive in his native France. He cites the example of a boy who inadvertently broke the glass window of a grocery store. People from the town gathered around the store to survey the situation, and concluded that, despite the broken glass, the boy had done an economic service for the community: The grocery owner now must pay the glazier $50 to replace his window, enriching the glazier and his business. Now, if we consider strictly the short-term consequences of this event, we conclude that first and foremost, the glazier is now $50 richer as a result of the broken window, a fact that is visible to and undisputed by everyone. The glazier will then spend the $50 on other goods and services, spurring other industries in the economy, as well. Essentially, the broken window has spurred economic activity in almost every conceivable way – at least in the minds of the simple townsmen.
But if we now consider the long-term consequences of the broken window, we will soon realize how foolish it is to believe that breaking stuff is actually a net positive for the economy. What is not as readily visible here is the unseen shoemaker, from whom the store owner could have, in the absence of a broken window, purchased new shoes. But as a result of the broken window, he has neither shoes nor a window, and he is financially worse off now than he was prior to this event by the precise amount of $50. Not only that, but society as a whole is poorer as a result of the broken window, since scarce resources have been diverted to re-create stuff that once existed, not create additional wealth in the economy. If a house in a village is destroyed, the village is poorer by the precise amount of one house. Instead of using scarce resources to build an additional house, thus making the village wealthier, those resources now must be used to create the same house again, making the village economically poorer. If we accept the broken window fallacy and take it to its absurd yet logical conclusion, however, then we ought to break every window, destroy every house, demolish every building, and completely dismantle our infrastructure: roads, sidewalks, train tracks, electrical lines, bridges, tunnels, and so on, and this would spur the entire national economy! It is truly hard to believe that anyone today could possibly subscribe to such economic illiteracy.
The broken window fallacy gives us a keen insight into the surging popularity of socialism. It’s quite evident that people are naturally inclined to support any policy for which they don’t directly bear the cost, a fact that doesn’t oblige any explanation, and, by itself, should explain why the promise of “free stuff” is the mantra of politicians today worldwide. But there’s another aspect of socialism that is usually disregarded – namely, that people support policies whose short-term consequences seem positive, while completely discounting the long-term consequences, which are almost always negative. Ask your average voters if they support socialized medicine, and they’ll most certainly answer in the affirmative, as they believe, erroneously of course, that declaring something “free” and a “right” will magically increase its supply. Moreover, ask yet another group of voters if they support forgiving college debt, and they’ll most certainly answer again in the affirmative, mistakenly believing, as before, that “forgiving” debt will magically expunge it out of existence.
In both of these cases, as with the scenario of the aforementioned broken window, people only consider the short-term effects – which are visible and clear and require no explanation – while discounting the long-term effects. The long-term negative effects of socialized medicine include chronic shortages of doctors, drugs, hospital beds, and medical equipment (as socialism merely redistributes the existing supply of something); the long-term negative effects of forgiving college debt include shifting the burden of debt from one set of taxpayers onto another set of taxpayers.
I believe that if we popularize Bastiat’s broken window fallacy to demonstrate the pros and cons of any economic policy, it’ll be very easy to demonstrate to the public whether that policy will be positive or negative in the long-run. And it doesn’t even require an economics degree.