The Seen and the Unseen

Henry Hazlitt, in his Economics in One Lesson, defines economics in this way: “The whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence: The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” Read this article and you will learn about an island country (Kiribati) that learned this the hard way. Their economy consisted of fishing and coconut oil. Concerned about overfishing, the government decided to subsidize the coconut oil industry. It turns out fishing increased by 33%. Why? Because the people earned more money making coconut oil, thanks to the government, and therefore they didn’t have to work as much to support themselves. And so they spent their free time doing what they loved – more fishingJJJ!!! The law of unintended consequences at work.

I know, let’s subsidize the ethanol industry, take taxpayer dollars and make it lucrative to grow corn for ethanol. That will really help the environment. Yay! Look at all the corn that is being turned into ethanol! Wait a minute…where are those food prices going???? How much does oil does it take to grow corn again???? Let’s give a special “no thanks” to the previous administration.

Thanks, Ryan, for telling me about this classic example of Bastiat’s “seen and unseen” insights (check out Wikipedia and this Russ Roberts article and this Russ Roberts article for more on Bastiat).

SDG,

The Farmer

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