By: Keith Miles
Life and science are full of pluses and minuses, debit and credit, good and bad, sin and virtue. For science the smallest matter has positive and negative-proton and neutron.
So when we hear from policy makers and politicians about any great idea that they have we need to not just hear their positive noises but also think about the negatives.
Our folk wisdom recognises this, so that we have sayings such as :-
Every cloud has a silver lining
Don’t waste a crisis
No good deed goes unpunished
I am sure readers can find other examples but each of the sayings shows that the lessons of life experience accept the plus and minus.
The famous and highly respected French economist Frederic Bastiat wrote ‘The parable of the broken window’. This is in his book ‘That which is seen, and that which is not seen’. He explains that an apparently expenditure that on the face of it appears beneficial is in fact negative. The parable is that the broken window produces work for the glazier so it must be a good economic result. But no one would advocate breaking windows just to create work and in addition the owner of the window is deprived of the alternative use if his money. Destruction of resources is never good.
This idea of seen and unseen fits with the plus and minus noted at the beginning.
Of course salesmen and politicians and propagandists formulate their proposals often with only the seen benefits and avoid mentioning the unseen. Many readers will recall examples of this but here are a few,
- Increase in minimum wage – Politicians present this as a great gift by them to lower paid people. But applying Bastiat’s law of seen-unseen we realise two things, one – everyone’s wages will go up to keep the relativities, and two – the costs in businesses will rise and therefore costs of goods and services will rise. It also prevents competition at the lowest level for those who may wish to supplement their income by low-cost part-time work
- New car park – Local governments who plan this will often put it in the most convenient place for them and where it becomes a show-piece. But again applying Bastiat’s seen-unseen law it may increase traffic in the centre of a town just where it is not wanted
- New motor way – An example of seen-unseen was the first motorway from Ljubljana to the coast which stopped at the edge of the most difficult drive down into Istria. This was another seen-unseen situation. It was great for the week-enders (at that time the new class under communism) but for traffic it did not help commercial vehicles where the greatest need existed for a dual carriageway into Koper and just moved the congestion from the edge of Ljubljana to the edge of Istria. This development, by the way, is also an example of Public Choice theory which was developed by the Nobel prize winning economist James Buchanan who showed that self-interest of politicians and bureaucrats with utility maximisation affected their decision making. Communism is full of small and large examples of this and democratic societies are also affected by this phenomenon.
- More money for the fine arts – Of course it is great virtue signalling when taxpayers money is given to artistic operations. Some may be justified as part of national heritage but unseen is the cronyism that happens and taxpayers lose the opportunity to use part of their own money for their own pursuits
- Sports funding – Again unseen will be the cronyism
- Windfall taxes – When a company makes a large profit because of sudden exceptional circumstances politicians will often call for a special one-off tax – a so-called windfall tax. Unseen is the fact that companies will also have poor years and the very good year’s profits will enable recovery in investment by that enterprise.
Particular and easy to recognise examples of this debit and credit world are the motor car and the internet. We can all see the benefits of the motor car in terms of industrial and personal progress but we can also see the pollution and loss of peace and quiet that resulted. We can all see the benefits that the expansion of access to information and the ease of communication that the internet has brought, but we now see the negatives in terms of spreading false information and new areas for criminal activity.
Whenever a proposal for spending public money takes place questions should be asked about what is unseen in the proposal and if there is any negativity as a result of public choice theory being applied.
Where is the debit and credit as far as the taxpayer is concerned? It is his or her money. What is unseen?