Businesses are Suffering (broken windows and Bastiat on what is seen and not seen)

By Scott Sumner.

"Almost any economic change produces winners and losers.  Ride share companies hurt the taxi industry.  In the future, Waymo may undercut the ride share companies.  Imports of inexpensive sneakers from China hurt the US shoe making industry.  And now we discover that San Francisco’s recent crackdown on street crime also produces negative consequences for some businesses:

Back in 1850, the French economist Frédéric Bastiat had this to say about the consequences of broken windows:

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.

Bastiat also applied this lesson to international trade.  Those who argue that trade hurts the economy are making the same mistake as those who argue that broken windows help the economy.  They ignore “that which is not seen.”

Some people complain that economists are out of touch when they advocate reducing street crime.  Glass repair shops provide lots of good paying jobs for blue-collar workers, jobs that allow them to support a family.  We sit in our ivory towers and dream up theories of creative destruction, not understanding the human cost of our policies.  What are these unemployed glass repairmen supposed to do for a living—become hamburger flippers?

I plead guilty.  In the end, I’d prefer a society that has both cars with intact windows and hamburgers over a society with no hamburgers and car windows that must frequently be repaired.  If you look around the world, the highest living standards are in places with the highest productivity—countries like Switzerland (which has zero tariffs and not much crime.)"