In any financial or economic situation, there will always be effects that are seen and some which are not seen. French economist, Frederic Bastiat, is primarily accredited with discovering this principle. In his book, uniquely titled, What is Seen and What is Not Seen, he illustrates this principle with the classic example of the broken window. In the story of the broken window, James Goodfellow begins with a perfectly functioning window. Through some accident, it breaks. From an obvious economic viewpoint, the broken window is a good thing because now Goodfellow must hier a glazier, thus circulating money into the economy. Bastiat would call this, what is seen. It is easy to perceive that money is being transferred from Goodfellow’s pocket into the glazier’s. However, Bastiat would consider the person who stops at what is seen a bad economist. The next step is to evaluate what is not seen.
What is not seen in this example is that by paying the glazier, Goodfellow loses money – money that he would have spent to purchase other things, such as new shoes or a book. The unseen aspect of this example is that regardless of the window’s status, Goodfellow is still circulating money through the economy. Whether Goodfellow breaks a window or not has no substantial benefit to society. Therefore a broken window does not affect the big-scale economy.
Being able to see what is not seen is the difference between a good economist and a bad economist. However, this is a universal principle, applicable far beyond economics. Bastiat wrote, “When a man is impressed by the effect that is seen and has not yet learned to discern the effects that are not seen, he indulges in deplorable habits, not only through natural inclination but deliberately.” Looking for what is not seen gives an individual the gift of foresight and the ability to make principle-based decisions.