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Public policy must take into account what is not seen as well as what is seen

Yesterday I wrote about the 8,700 jobs lost to as a result of increased electricity prices in Minnesota. To judge the impacts of renewable energy on employment, we must balance these against the 6,200 which it is estimated have been created.

As with the glazing industry, so with renewable energy. There might well be many very good reasons to pursue renewables. But one that is often given is the jobs it offers, an estimated 6,200. These are seen. But to make a fully informed decision, we must remember Bastiat and also account for what is not seen, those 8,700 other jobs.

Broken windows

The 19th century economist Frédéric Bastiat spoke about this. He referred to what is seen (in this case the 6,200 jobs created in renewables) and what is not seen (the 8,700 jobs elsewhere). He illustrated this logic with his famous example of the broken window.

Have you ever been witness to the fury of that solid citizen, James Goodfellow, when his incorrigible son has happened to break a pane of glass? If you have been present at this spectacle, certainly you must also have observed that the onlookers, even if there are as many as thirty of them, seem with one accord to offer the unfortunate owner the selfsame consolation: “It’s an ill wind that blows nobody some good. Such accidents keep industry going. Everybody has to make a living. What would become of the glaziers if no one ever broke a window?”

Now, this formula of condolence contains a whole theory that it is a good idea for us to expose, flagrante delicto, in this very simple case, since it is exactly the same as that which, unfortunately, underlies most of our economic institutions.

Suppose that it will cost six francs to repair the damage. If you mean that the accident gives six francs’ worth of encouragement to the aforesaid industry, I agree. I do not contest it in any way; your reasoning is correct. The glazier will come, do his job, receive six francs, congratulate himself, and bless in his heart the careless child. That is what is seen.

But if, by way of deduction, you conclude, as happens only too often, that it is good to break windows, that it helps to circulate money, that it results in encouraging industry in general, I am obliged to cry out: That will never do! Your theory stops at what is seen. It does not take account of what is not seen.

It is not seen that, since our citizen has spent six francs for one thing, he will not be able to spend them for another. It is not seen that if he had not had a windowpane to replace, he would have replaced, for example, his worn-out shoes or added another book to his library. In brief, he would have put his six francs to some use or other for which he will not now have them.

Let us next consider industry in general. The window having been broken, the glass industry gets six francs’ worth of encouragement; that is what is seen.

If the window had not been broken, the shoe industry (or some other) would have received six francs’ worth of encouragement; that is what is not seen.

As with the glazing industry, so with renewable energy. The money spent to generate the jobs there is money not spent generating jobs somewhere else. There might well be many very good reasons to pursue renewables. But one that is often given is the jobs it offers, an estimated 6,200. These are seen. But to make a fully informed decision, we must remember Bastiat and also account for what is not seen, those 8,700 other jobs.

John Phelan is an economist at the Center of the American Experiment.

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