The title should read: What Gets Measured etc. There are a few typos in the Report ‘Reaking’ for ‘Breaking’ and the ratio mentions gold where it should say silver. No matter; it barely interrupts the flow.
Let’s start with Frederic Bastiat’s 170-year old parable of the broken window. A shopkeeper has a broken window. The shopkeeper is, of course, upset at the loss of six francs (0.06oz gold, or about $75). Bastiat discusses a then-popular facile argument: the glass guy is making money (to which all we can say is, “plus ça change, plus c’est la même chose”). Bastiat says it is true, and this is the seen. The glazier does make money.
Then he introduces the concept of the unseen. The shoemaker does not earn the 6 francs he would have earned, had the shopkeeper not had to replace his window. The shopkeeper himself has the same window as before, but he is poorer by 6 francs. The unseen are the consumer, and the other producer. The consumer must consume less, and thus is impoverished. The other producer’s business shrinks in proportion to the gain in the glassmaker’s business.
Bastiat does not stop there. He adds that a government-imposed restriction can be thought of as a partial destruction.
Does anyone else feel as we do—that there should be a day to commemorate Bastiat?
Read the full Report here