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Don Boudreaux recently shared a letter he wrote to Forbes...A Slave to the Seen. In his letter he destroys Bob Deitrick's argument that the US government made a smart decision in bailing out the auto manufactures. Here's a snippet from Boudreaux's letter...
The outcome is invariably the inefficient allocation of resources. We minimize the amount of value we derive from our limited resources.
Over at the Bleeding Heart Libertarian Blog...Jason Brennan described the unseen with regard to paying Walmart employees higher wages...
Again it should be clear that the outcome would be an inefficient allocation of resources. There will be greater unemployment among people with lower skills...which is more "seen" for the government to try and "fix". It's a vicious cycle that results in the destruction of value.
Here's Bastiat describing the unseen...
So are you a slave to the seen? Most people are. For example, my gf was talking on the phone today with a friend. They were both pretty happy about the Affordable Care Act because they both have pre-existing conditions. The "seen" here is "affordable" healthcare which is basically a free lunch. At the risk of sounding like a heartless prick, I tried to explain that there's no such thing as a free lunch. Subsidizing healthcare will invariably come at the expense of other goods/services that they might value even more. Except, I couldn't effectively and quickly show them the unseen. It's just a given that the resources have to be taken from other places. And if consumers aren't free to choose between X or Y...then how could the most valuable option possibly be selected? Therefore, the result will be an inefficient allocation of resources...the destruction of value.
If we want to derive the maximum amount of value from our limited resources...then consumers must be free to indicate how much they value the various uses of our limited resources. Minimum wages, subsidies and price ceilings all have to be eliminated in order for resources to freely flow. If resources can't freely flow...if they are damned up and misdirected...then entrepreneurs will waste their resources chasing mirages.
Garbage in...garbage out.
Mr. Deitrick’s concept of “worked” is too lax. No one doubts that companies can be kept afloat with enough special privileges from government. In contrast, when the concept of “worked” requires improvement of the overall economy, the mere continued operation – or even thriving – of subsidized corporations is insufficient evidence that such subsidies have worked. What industries are kept smaller because government is directing resources artificially to auto producers? What jobs are not being created because auto jobs are protected? What excessively risky decisions are auto executives now taking, confident that their firms likely will be bailed out again when trouble strikes?
The outcome is invariably the inefficient allocation of resources. We minimize the amount of value we derive from our limited resources.
Over at the Bleeding Heart Libertarian Blog...Jason Brennan described the unseen with regard to paying Walmart employees higher wages...
What happens if Walmart starts offering to pay cashiers and shelf stockers $22/hr? As it raises wages, the kind of people who compete for Walmart jobs changes. As wages go up, workers with greater skill, human capital, and experience start to compete for these jobs, and, being better workers, they will beat out the kind of workers who are currently getting Walmart jobs. Call this phenomenon job gentrification. If Walmart increases its wage significantly, this will be very good for the people who end up working at Walmart. But that doesn’t mean it will be good for the kind of people who currently are getting the low-paying jobs at Walmart.
Again it should be clear that the outcome would be an inefficient allocation of resources. There will be greater unemployment among people with lower skills...which is more "seen" for the government to try and "fix". It's a vicious cycle that results in the destruction of value.
Here's Bastiat describing the unseen...
But, besides all this, there is something which is not seen. The fifty millions expended by the State cannot be spent, as they otherwise would have been, by the tax-payers. It is necessary to deduct, from all the good attributed to the public expenditure which has been effected, all the harm caused by the prevention of private expense, unless we say that James B. would have done nothing with the crown that he had gained, and of which the tax had deprived him; an absurd assertion, for if he took the trouble to earn it, it was because he expected the satisfaction of using it, He would have repaired the palings in his garden, which he cannot now do, and this is that which is not seen. He would have manured his field, which now he cannot do, and this is what is not seen. He would have added another story to his cottage, which he cannot do now, and this is what is not seen. He might have increased the number of his tools, which he cannot do now, and this is what is not seen. He would have been better fed, better clothed, have given a better education to his children, and increased his daughter's marriage portion; this is what is not seen. He would have become a member of the Mutual Assistance Society, but now he cannot; this is what is not seen. On one hand, are the enjoyments of which he has been deprived, and the means of action which have been destroyed in his hands; on the other, are the labour of the drainer, the carpenter, the smith, the tailor, the village-schoolmaster, which he would have encouraged, and which are now prevented - all this is what is not seen. - Frédéric Bastiat, The Seen vs the Unseen
So are you a slave to the seen? Most people are. For example, my gf was talking on the phone today with a friend. They were both pretty happy about the Affordable Care Act because they both have pre-existing conditions. The "seen" here is "affordable" healthcare which is basically a free lunch. At the risk of sounding like a heartless prick, I tried to explain that there's no such thing as a free lunch. Subsidizing healthcare will invariably come at the expense of other goods/services that they might value even more. Except, I couldn't effectively and quickly show them the unseen. It's just a given that the resources have to be taken from other places. And if consumers aren't free to choose between X or Y...then how could the most valuable option possibly be selected? Therefore, the result will be an inefficient allocation of resources...the destruction of value.
If we want to derive the maximum amount of value from our limited resources...then consumers must be free to indicate how much they value the various uses of our limited resources. Minimum wages, subsidies and price ceilings all have to be eliminated in order for resources to freely flow. If resources can't freely flow...if they are damned up and misdirected...then entrepreneurs will waste their resources chasing mirages.
Garbage in...garbage out.