Word
Gems
What is a
man but the sum of his thoughts?
Wealth
& Economics:
- Frederic
Bastiat's
- "That Which is
Seen and That Which is Not Seen"
Frederic Bastiat (1801-1850), while not a credentialed economist, wrote
with such profound insight that his writings -- in particular, his essay, That Which
is Seen and That Which is Not Seen -- would greatly influence many of "the
dismal science" down to our present day. Henry Hazlitt, for example, credits Bastiat
with many ideas expressed in Economics in One Lesson.
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 favourable, 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.
In fact, it is the same in the science of health, arts, and in that of
morals. It often happens, that the sweeter the first fruit of a habit is, the more bitter
are the consequences. Take, for example, debauchery, idleness, prodigality. When,
therefore, a man absorbed in the effect which is seen has not yet learned to discern those
which are not seen, he gives way to fatal habits, not only by inclination, but by
calculation.
This explains the fatally grievous condition of mankind. Ignorance
surrounds its cradle: then its actions are determined by their first consequences, the
only ones which, in its first stage, it can see. It is only in the long run that it learns
to take account of the others. It has to learn this lesson from two very different masters
- experience and foresight. Experience teaches effectually, but brutally. It makes us
acquainted with all the effects of an action, by causing us to feel them; and we cannot
fail to finish by knowing that fire burns, if we have burned ourselves. For this rough
teacher, I should like, if possible, to substitute a more gentle one. I mean Foresight.
For this purpose I shall examine the consequences of certain economical phenomena, by
placing in opposition to each other those which are seen, and those which are not seen.
I. THE BROKEN WINDOW
Have you ever witnessed the anger of the good shopkeeper, James B., when
his careless son happened to break a square of glass? If you have been present at such a
scene, you will most assuredly bear witness to the fact, that every one of the spectators,
were there even thirty of them, by common consent apparently, offered the unfortunate
owner this invariable consolation -- "It is an ill wind that blows nobody good.
Everybody must live, and what would become of the glaziers if panes of glass were never
broken?"
Now, this form of condolence contains an entire theory, which it will be
well to show up in this simple case, seeing that it is precisely the same as that which,
unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the
accident brings six francs to the glazier's trade - that it encourages that trade to the
amount of six francs -- I grant it; I have not a word to say against it; you reason
justly. The glazier comes, performs his task, receives his six francs, rubs his hands,
and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often
the case, that it is a good thing to break windows, that it causes money to circulate, and
that the encouragement of industry in general will be the result of it, you will oblige me
to call out, "Stop there! your theory is confined to that which is seen; it takes no
account of that which is not seen."
It is not seen that as our shopkeeper has spent six francs upon one
thing, he cannot spend them upon another. It is not seen that if he had not had a window
to replace, he would, perhaps, have replaced his old shoes, or added another book to his
library. In short, he would have employed his six francs in some way, which this accident
has prevented.
Let us take a view of industry in general, as affected by this
circumstance. The window being broken, the glazier's trade is encouraged to the amount of
six francs; this is that which is seen. If the window had not been broken, the shoemaker's
trade (or some other) would have been encouraged to the amount of six francs; this is that
which is not seen.
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 labour, is
affected, whether windows are broken or not.
Now let us consider James B. himself. In the former supposition, that of
the window being broken, he spends six francs, and has neither more nor less than he had
before, the enjoyment of a window.
In the second, where we suppose the window not to have been broken, he
would have spent six francs on shoes, and would have had at the same time the enjoyment of
a pair of shoes and of a window.
Now, as James B. forms a part of society, we must come to the
conclusion, that, taking it altogether, and making an estimate of its enjoyments and its
labours, it has lost the value of the broken window.
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 labour; or, more briefly, "destruction is not profit."
What will you say, Monsieur Industriel -- what will you say, disciples
of good M. F. Chamans, who has calculated with so much precision how much trade would gain
by the burning of Paris, from the number of houses it would be necessary to rebuild?
I am sorry to disturb these ingenious calculations, as far as their
spirit has been introduced into our legislation; but I beg him to begin them again, by
taking into the account that which is not seen, and placing it alongside of that which is
seen. 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
labour 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. 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. Therefore, if
you will only go to the root of all the arguments which are adduced in its favour, all you
will find will be the paraphrase of this vulgar saying - What would become of the
glaziers, if nobody ever broke windows? ...
III. TAXES
Have you ever chanced to hear it said "There is no better
investment than taxes. Only see what a number of families it maintains, and consider how
it reacts on industry; it is an inexhaustible stream, it is life itself."
In order-to combat this doctrine, I must refer to my preceding
refutation. Political economy knew well enough that its arguments were not so amusing that
it could be said of them, repetitions please. It has, therefore, turned the proverb to its
own use, well convinced that, in its mouth, repetitions teach.
The advantages which officials advocate are those which are seen. The
benefit which accrues to the providers is still that which is seen. This blinds all eyes.
But the disadvantages which the tax-payers have to get rid of are those
which are not seen. And the injury which results from it to the providers, is still that
which is not seen, although this ought to be self-evident.
When an official spends for his own profit an extra hundred sous, it
implies that a tax-payer spends for his profit a hundred sous less. But the expense of the
official is seen, because the act is performed, while that of the tax-payer is not seen,
because, alas! he is prevented from performing it.
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?
Again, you ought to ask yourself whether it is possible that the soil
can receive as much of this precious water by rain as it loses by evaporation?
There is one thing very certain, that when James B. counts out a hundred
sous for the tax-gatherer, he receives nothing in return. Afterwards, when an official
spends these hundred sous and returns them to James B., it is for an equal value of corn
or labour. The final result is a loss to James B. of five francs.
It is very true that often, perhaps very often, the official performs
for James B. an equivalent service. In this case there is no loss on either side; there is
merely in exchange. Therefore, my arguments do not at all apply to useful functionaries.
All I say is, - if you wish to create an office, prove its utility. Show that its value to
James B., by the services which it performs for him, is equal to what it costs him. But,
apart from this intrinsic utility, do not bring forward as an argument the benefit which
it confers upon the official, his family, and his providers; do not assert that it
encourages labour.
When James B. gives a hundred pence to a Government officer, for a
really useful service, it is exactly the same as when he gives a hundred sous to a
shoemaker for a pair of shoes.
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 labour; 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.
Let us accustom ourselves, then, to avoid judging of things by what is
seen only, but to judge of them by that which is not seen.
Last year I was on the Committee of Finance, for under the constituency
the members of the opposition were not systematically excluded from all the Commissions:
in that the constituency acted wisely. We have heard M. Thiers say - "I have passed
my life in opposing the legitimist party, and the priest party. Since the common danger
has brought us together, now that I associate with them and know them, and now that we
speak face to face, I have found out that they are not the monsters I used to imagine
them."
Yes, distrust is exaggerated, hatred is fostered among parties who never
mix; and if the majority would allow the minority to be present at the Commissions, it
would perhaps be discovered that the ideas of the different sides are not so far removed
from each other, and, above all, that their intentions are not so perverse as is supposed.
However, last year I was on the Committee of Finance. Every time that one of our
colleagues spoke of fixing at a moderate figure the maintenance of the President of the
Republic, that of the ministers, and of the ambassadors, it was answered-
"For the good of the service, it is necessary to surround certain
offices with splendour and dignity, as a means of attracting men of merit to them. A vast
number of unfortunate persons apply to the President of the Republic, and it would be
placing him in a very painful position to oblige him to be constantly refusing them. A
certain style in the ministerial saloons is a part of the machinery of constitutional
Governments."
Although such arguments may be controverted, they certainly deserve a
serious examination. They are based upon the public interest, whether rightly estimated or
not; and as far as I am concerned, I have much more respect for them than many of our
Catos have, who are actuated by a narrow spirit of parsimony or of jealousy.
But what revolts the economical part of my conscience, and makes me
blush for the intellectual resources of my country, is when this absurd relic of feudalism
is brought forward, which it constantly is, and it is favourably received too:-
"Besides, the luxury of great Government officers encourages the
arts, industry, and labour. The head of the State and his ministers cannot give banquets
and soirees without causing life to circulate through all the veins of the social body. To
reduce their means, would starve Parisian industry, and consequently that of the whole
nation."
I must beg you, gentlemen, to pay some little regard to arithmetic, at
least; and not to say before the National Assembly in France, lest to its shame it should
agree with you, that an addition gives a different sum, according to whether it is added
up from the bottom to the top, or from the top to the bottom of the column.
For instance, I want to agree with a drainer to make a trench in my
field for a hundred sous. Just as we have concluded our arrangement, the tax-gatherer
comes, takes my hundred sous, and sends them to the Minister of the Interior; my bargain
is at end, but the Minister will have another dish added to his table. Upon what ground
will you dare to affirm that this official expense helps the national industry? Do you not
see, that in this there is only a reversing of satisfaction and labour? A Minister has his
table better covered, it is true, but it is just as true that an agriculturist has his
field worse drained. A Parisian tavern-keeper has gained a hundred sous,I grant you; but
then you must grant me that a drainer has been prevented from gaining five francs. It all
comes to this, - that the official and the tavern-keeper being satisfied, is that which is
seen; the field undrained, and the drainer deprived of his job, is that which is not seen.
Dear me! how much trouble there is in proving that two and two make four; and if you
succeed in proving it, it is said, "the thing is so plain it is quite tiresome,"
and they vote as if you had proved nothing at all. ...
XI. FRUGALITY AND LUXURY
It is not only in the public expenditure that what is seen eclipses what
is not seen. Setting aside what relates to political economy, this phenomenon leads to
false reasoning. It causes nations to consider their moral and their material interests as
contradictory to each other. What can be more discouraging, or more dismal?
For instance, there is not a father of a family who does not think it
his duty to teach his children order, system, the habits of carefulness, of economy, and
of moderation in spending money.
There is no religion which does not thunder against pomp and luxury.
This is as it should be; but, on the other hand, how frequently do we hear the following
remarks:-
"To hoard, is to drain the veins of the people."
"The luxury of the great is the comfort of the little."
"Prodigals ruin themselves, but they enrich the State."
"It is the superfluity of the rich which makes bread for the
poor."
Here, certainly, is a striking contradiction between the moral and the
social idea.
How many eminent spirits, after having made the assertion, repose in
peace. It is a thing I never could understand, for it seems to me that nothing can be more
distressing than to discover two opposite tendencies in mankind. Why, it comes to
degradation at each of the extremes: economy brings it to misery; prodigality plunges it
into moral degradation. Happily, these vulgar maxims exhibit economy and luxury in a false
light, taking account, as they do, of those immediate consequences which are seen, and not
of the remote ones, which are not seen. Let us see if we can rectify this incomplete view
of the case.
Mondor and his brother Aristus, after dividing the paternal inheritance,
have each an income of 50,000 francs. Mondor practises the fashionable philanthropy. He is
what is called a squanderer of money. He renews his furniture several times a year;
changes his equipages every month. People talk of his ingenious contrivances to bring them
sooner to an end: in short, he surpasses the fast livers of Balzac and Alexander Dumas.
Thus, everybody is singing his praises. It is, "Tell us about
Mondor? Mondor for ever! He is the benefactor of the workman; a blessing to the people. It
is true, he revels in dissipation; he splashes the passers-by; his own dignity and that of
human nature are lowered a little; but what of that? He does good with his fortune, if not
with himself. He causes money to circulate; he always sends the tradespeople away
satisfied. Is not money made round that it may roll?"
Aristus has adopted a very different plan of life. If he is not an
egotist, he is, at any rate, an individualist, for he considers expense, seeks only
moderate and reasonable enjoyments, thinks of his children's prospects, and, in fact, he
economises.
And what do people say of him? "What is the good of a rich fellow
like him? He is a skinflint. There is something imposing, perhaps, in the simplicity of
his life; and he is humane, too, and benevolent, and generous, but he calculates. He does
not spend his income; his house is neither brilliant nor bustling. What good does he do to
the paper hangers, the carriage makers, the horse dealers, and the confectioners?"
These opinions, which are fatal to morality, are founded upon what
strikes the eye: -- the expenditure of the prodigal; and another, which is out of sight,
the equal and even superior expenditure of the economist.
But things have been so admirably arranged by the Divine inventor of
social order, that in this, as in everything else, political economy and morality, far
from clashing, agree; and the wisdom of Aristus is not only more dignified, but still more
profitable, than the folly of Mondor. And when I say profitable, I do not mean only
profitable to Aristus, or even to society in general, but more profitable to the workmen
themselves -- to the trade of the time.
To prove it, it is only necessary to turn the mind's eye to those hidden
consequences of human actions, which the bodily eye does not see.
Yes, the prodigality of Mondor has visible effects in every point of
view. Everybody can see his landaus, his phaetons, his berlins, the delicate paintings on
his ceilings, his rich carpets, the brilliant effects of his house. Every one knows that
his horses run upon the turf. The dinners which he gives at the Hotel de Paris attract the
attention of the crowds on the Boulevards; and it is said, "That is a generous man;
far from saving his income, he is very likely breaking into his capital." This is
what is seen.
It is not easy to see, with regard to the interest of workers, what
becomes of the income of Aristus. If we were to trace it carefully, however, we should see
that the whole of it, down to the last farthing, affords work to the labourers, as
certainly as the fortune of Mondor. Only there is this difference: the wanton extravagance
of Mondor is doomed to be constantly decreasing, and to come to an end without fail;
whilst the wise expenditure of Aristus will go on increasing from year to year. And if
this is the case, then, most assuredly, the public interest will be in unison with
morality.
Aristus spends upon himself and his household 20,000 francs a year. If
that is not sufficient to content him, he does not deserve to be called a wise man. He is
touched by the miseries which oppress the poorer classes; he thinks he is bound in
conscience to afford them some relief, and therefore he devotes 10,000 francs to acts of
benevolence. Amongst the merchants, the manufacturers, and the agriculturists, he has
friends who are suffering under temporary difficulties; he makes himself acquainted with
their situation, that he may assist them with prudence and efficiency, and to this work he
devotes 10,000 francs more. Then he does not forget that he has daughters to portion, and
sons for whose prospects it is his duty to provide, and therefore he considers it a duty
to lay by and put out to interest 10,000 francs every year.
The following is a list of his expenses:
1st, Personal expenses......... 20,000 fr.
2nd, Benevolent objects........ 10,000
3rd, Offices of friendship..... 10,000
4th, Saving.................... 10,000
Let us examine each of these items, and we shall see that not a single
farthing escapes the national labour.
1st. Personal expenses. These, as far as work-people and tradesmen are
concerned, have precisely the same effect as an equal sum spent by Mondor. This is
self-evident, therefore we shall say no more about it.
2nd. Benevolent objects. The 10,000 francs devoted to this purpose
benefit trade in an equal degree; they reach the butcher, the baker, the tailor, and the
carpenter. The only thing is, that the bread, the meat, and the clothing are not used by
Aristus, but by those whom he has made his substitutes. Now, this simple substitution of
one consumer for another, in no way effects trade in general. It is all one, whether
Aristus spends a crown, or desires some unfortunate person to spend it instead.
3rd. Offices of friendship. The friend to whom Aristus lends or gives
10,000 francs, does not receive them to bury them; that would be against the hypothesis.
He uses them to pay for goods, or to discharge debts. In the first case, trade is
encouraged. Will any one pretend to say that it gains more by Mondor's purchase of a
thorough-bred horse for 10,000 francs, than by the purchase of 10,000 francs' worth of
stuffs by Aristus or his friend? For, if this sum serves to pay a debt, a third person
appears, viz. the creditor, who will certainly employ them upon something in his trade,
his household, or his farm. He forms another medium between Aristus and the workmen. The
names only are changed, the expense remains, and also the encouragement to trade.
4th. Saving. There remains now the 10,000 francs saved; and it is here,
as regards the encouragement to the arts, to trade, labour, and the workmen, that Mondor
appears far superior to Aristus, although, in a moral point of view, Aristus shows
himself, in some degree, superior to Mondor.
I can never look at these apparent contradictions between the great laws
of nature, without a feeling of physical uneasiness which amounts to suffering. Were
mankind reduced to the necessity of choosing between two parties, one of whom injures his
interest, and the other his conscience, we should have nothing to hope from the future.
Happily, this is not the case; and to see Aristus regain his economical superiority, as
well as his moral superiority, it is sufficient to understand this consoling maxim, which
is no less true from having a paradoxical appearance, "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 labour quite
as certainly as if Aristus, following the example of his brother, had exchanged it for
furniture, jewels, and horses.
For when Aristus buys lands or rents for 10,000 francs, he is determined
by the consideration that he does not want to spend this money. This is why you complain
of him.
But, at the same time, the man who sells the land or the rent, is
determined by the consideration that he does want to spend the 10,000 francs in some way;
so that the money is spent in any case, either by Aristus, or by others in his stead.
With respect to the working class, to the encouragement of labour, there
is only one difference between the conduct of Aristus and that of Mondor. Mondor spends
the money himself and therefore the effect is seen. Aristus, spending it partly through
intermediate parties, and at a distance, the effect is not seen. But, in fact, those who
know how to attribute effects to their proper causes, will perceive, that what is not seen
is as certain as what is seen. This is proved by the fact, that in both cases the money
circulates, and does not lie in the iron chest of the wise mall, any more than it does in
that of the spendthrift. It is, therefore, false to say that economy does actual harm to
trade; as described above, it is equally beneficial with luxury.
But how far superior is it, if, instead of confining our thoughts to the
present moment, we let them embrace a longer period!
Ten years pass away. What is become of Mondor and his fortune, and his
great popularity? Mondor is ruined. Instead of spending 60,000 francs every year in the
social body, he is, perhaps, a burden to it. In any case, he is no longer the delight of
shopkeepers; he is no longer the patron of the arts and of trade; he is no longer of any
use to the workmen, nor are his successors, whom he has brought to want.
At the end of the same ten years, Aristus not only continues to throw
his income into circulation, but he adds an increasing sum from year to year to his
expenses. He enlarges the national capital, that is, the fund which supplies wages, and as
it is upon the extent of this fund that the demand for hands depends, he assists in
progressively increasing the remuneration of the working class; and if he dies, he leaves
children whom he has taught to succeed him in this work of progress and civilization.
In a moral point of view, the superiority of frugality over luxury is
indisputable. It is consoling to think that it is so in political economy, to every one
who, not confining his views to the immediate effects of phenomena, knows how to extend
his investigations to their final effects.
XII. HAVING A RIGHT TO WORK, HAVING A RIGHT TO PROFIT
"Brethren, you must club together to find me work at your own
price." This is the right to work; i.e., elementary socialism of the first degree.
"Brethren, you must club together to find me work at my own
price." This is the right to profit; i.e., refined socialism, or socialism of the
second degree.
Both of these live upon such of their effects as are seen. They will die
by means of those effects which are not seen.
That which is seen, is the labour and the profit excited by social
combination. That which is not seen, is the labour and the profit to which this same
combination would give rise, if it were left to the tax-payers.
In 1848, the right to labour for a moment showed two faces. This was
sufficient to ruin it in public opinion.
One of these faces was called national workshops. The other, forty-five
centimes. Millions of francs went daily from the Rue Rivoli to the national workshops.
This was the fair side of the medal.
And this is the reverse. If millions are taken out of a cash-box, they
must first have been put into it. This is why the organizers of the right to public labour
apply to the tax-payers.
Now, the peasants said, "I must pay forty-five centimes; then I
must deprive myself of some clothing. I cannot manure my field; I cannot repair my
house."
And the country workmen said, "As our townsman deprives himself of
same clothing, there will be less work for the tailor; as he does not improve his field,
there will be less work for the drainer; as he does not repair his house, there will be
less work for the carpenter and mason."
It was then proved that two kinds of meal cannot come out of one sack,
and that the work furnished by the Government was done at the expense of labour, paid for
by the tax-payer. This was the death of the right to labour, which showed itself as much a
chimera as an injustice. And yet, the right to profit, which is only an exaggeration of
the right to labour, is still alive and flourishing.
Ought not the protectionist to blush at the part he would make society
play?
He says to it, "You must give me work, and, more than that,
lucrative work. I have foolishly fixed upon a trade by which I lose ten per cent. If you
impose a tax of twenty francs upon my countrymen, and give it to me, I shall be a gainer
instead of a loser. Now, profit is my right; you owe it me." Now, any society which
would listen to this sophist, burden itself with taxes to satisfy him, and not perceive
that the loss to which any trade is exposed is no less a loss when others are forced to
make up for it, such a society, I say, would deserve the burden inflicted upon it.
Thus we learn, by the numerous subjects which I have treated, that, to
be ignorant of political economy is to allow ourselves to be dazzled by the immediate
effect of a phenomenon; to be acquainted with it is to embrace in thought and in
forethought the whole compass of effects.
I might subject a host of other questions to the same test; but I shrink
from the monotony of a constantly uniform demonstration, and I conclude by applying to
political economy what Chateaubriand says of history:
"There are," he says, "two consequences in history; an
immediate one, which is instantly recognized, and one in the distance, which is not at
first perceived. These consequences often contradict each other; the former are the
results of our own limited wisdom, the latter, those of that wisdom which endures. The
providential event appears after the human event. God rises up behind men. Deny, if you
will, the supreme counsel; disown its action; dispute about words; designate, by the term,
force of circumstances, or reason, what the vulgar call Providence; but look to the end of
an accomplished fact, and you will see that it has always produced the contrary of what
was expected from it, if it was not established at first upon morality and justice."
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