One of Frederic Bastiat‘s most basic, and most important, insights is the distinction between the seen and the unseen. In what is arguably his most famous essay, “What is Seen and What is Not Seen,” he wrote:
In the sphere of economics an action, a habit, an institution or a law engenders not just one effect but a series of effects. Of these effects only the first is immediate; it is revealed simultaneously with its cause, it is seen. The others merely occur successively, they are not seen; we are lucky if we foresee them.
The entire difference between a bad and a good Economist is apparent here. A bad one relies on the visible effect while the good one takes account both of the effect one can see and of those one must foresee.
Earlier this week, I was watching Danny DeVito’s character Lawrence Garfield give his famous speech in which he tries to persuade shareholders to vote to sell him majority ownership of New England Wire and Cable so that he can liquidate the company because it’s worth more dead than alive.
Prior to Garfield’s speech, Gregory Peck’s character Andrew Jorgensen, chairman of the company, is trying to persuade shareholders not to vote to sell majority ownership to Garfield.
Watching their speeches for the nth time, I realized that they are the perfect illustration of Bastiat’s seen and unseen. Jorgensen is telling the audience of the seen: the company they know, the relationships they have with each other, the nice history they have had with the company and maybe with some of the workers. That’s all seen because it’s tangible; it’s visible.
We often hear and read that Garfield is simply talking about money and how to maximize profit. He is talking about that. But pay attention to his speech and you see that he is talking about his own vision, his vision of the seen, that he makes tangible to his audience. If the company is liquidated, he tells his audience, there will be new uses for the money they save. Those uses aren’t seen now but they will be seen. Check the part that starts at about 4:00.
BTW, DeVito’s speech is one of my all-time favorites. When I was watching it, I found myself saying most of the words out loud before he got to them.
READER COMMENTS
Ahmed Fares
Oct 14 2023 at 3:14pm
Imagine a game park with gazelles. No lions, just gazelles. Soon the gazelles, realizing they’re not in any danger, start getting fat and lazy. Some get diabetes, go blind, and start bumping into trees. A truly horrible sight to see.
Now throw a few lions into the park. The lions quickly make lunch meat of the fattest and weakest gazelles. Soon, the gazelles start running around, all the while looking over their shoulders, knowing that if they don’t perform well, they’ll be next on the menu. They become lean and graceful as gazelles ought to be.
The gazelles are corporate CEOs and the lions are private equity.
Jim Glass
Oct 14 2023 at 5:10pm
That was one of my favorite movies, not least because it was intelligently fair to both sides (How often do you see that these days?) as well as entertaining.
The real-life plant that was the inspiration for the movie is now the Wire Mill Saloon & Barbecue, in Georgetown, CT, near where I now live. Thusly capitalism recycles productive assets. Well, I haven’t been able to confirm that it was the “inspiration” for the movie as the locals claim — though it was subject to just such a dispute and much litigation — but the movie was filmed there, that’s a true fact, it was the mill you see in the movie, where Danny and Greg gave their speeches to the locals acting as extras. That’s good enough for me.
The BBQ and beer there are pretty good too, so if you ever are in the neighborhood…
David Henderson
Oct 14 2023 at 7:01pm
Thanks, Jim. Was your last sentence a semi-invite? 🙂
Jim Glass
Oct 14 2023 at 7:08pm
Of course!
David Henderson
Oct 15 2023 at 12:46pm
Thanks, Jim.
Thomas L Hutcheson
Oct 14 2023 at 5:33pm
“The entire difference between a bad and a good Economist is apparent here. A bad one relies on the visible effect while the good one takes account both of the effect one can see and of those one must foresee.”
Excellent summary of one arm of my beef with the zero tax on CO2 emissions for deal with the CO2 accumulation concentration (or opposition to a greater EITC for transferring income to low wage workers). Even if they do not agree these are optimum policies, they do not foresee that the alternative is a definitely inferior policy.
David Henderson
Oct 14 2023 at 7:02pm
What’s your basis for thinking that a zero CO2 tax is an inferior policy?
Thomas L Hutcheson
Oct 15 2023 at 8:16am
I mean that instead of a relatively low DW loss excise tax we get subsidies for EV, roof-top solar, Hydrogen hubs, etc.
David Henderson
Oct 15 2023 at 12:46pm
Ah, good point. I agree with you.
john hare
Oct 14 2023 at 5:40pm
Possibly off topic is something I just realized today. Two of my long term employees from Mexico started their own companies last year with my help. They have been struggling to put it together from a business perspective as that has always been my problem. Most of their work is subcontracted from me.
Both of them have kids in their 20s that were previously not interested in the work or the business. Over the last several months each of them has a young family member hitting the books and internet figuring out how to do it better both business and technical. Bright spot I didn’t see coming as there is a real shortage of youngsters stepping up in the trades.
Thomas L Hutcheson
Oct 15 2023 at 8:24am
🙂 Great!
I cannot understand why this is not the stereotype of the immigrant, even the low-skill immigrant and that we do not reform our system to recruit more such people? Enforcing border and visa overstay controls would be much easier if there were an actual presumption that anyone attempting to enter illegally would in fact be an undesirable immigrant.
David Henderson
Oct 15 2023 at 12:47pm
It probably should be the stereotype of the immigrant, given that stereotypes often do approximately represent reality.
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