The Seen and the Unseen

While others were distracted by the events that led to a man’s death, Sherlock makes a breakthrough by observing the unseen. The fact that the man’s dog didn’t do anything at the time he was killed.?

Often, we confine our vision to what’s happening right in front of us. Little effort is made to see things occurring beneath the surface.

For instance, Indians are beholden to the rapid inflation of real estate prices. It's common to see people boasting how property prices have increased manifold in the past few years.?

All possibly true. However, a realistic picture can only emerge if the said growth is compared to how investing the same amount elsewhere would have worked out.?

The gains may not be nearly as glitzy once the alternatives are explored. And, we’re not even considering the illiquid character of real estate that makes midway withdrawal difficult.?

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The Broken Window Fallacy

Claude Frédéric Bastiat in his article titled, “That Which Is Seen, and That Which Is Not Seen” explores this train of thought at length.?

He takes the example of a shopkeeper, James B, whose careless son happened to break a pane of glass. As is typical, the bystanders console the shopkeeper, “Everybody must live, and what would become of the glaziers if panes of glass were never broken?"

“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”.??

So, we posit that “it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general.”

All this is seen.?

But let’s go further and examine the unseen.?

The six francs that the shopkeeper spent on repairing the mirror cannot be used for another purchase. He could have bought a new pair of shoes or books. Things he cannot buy now because of the accident.?

Further, James has neither less or more than before. If the window were not broken, he would have had a book in addition to the functioning window.?

He concludes: "Society loses the value of things which are uselessly destroyed."?

Or, briefly, "Destruction is not profit."

Back in my MBA days, my finance professor used to remark: “Frugality is good for the person, but bad for the society.”?

Among all the examples in the article, I liked the one that critiques the above maxim. It tells us about how two brothers, Mondor and Aristus, use the inherited property (divided equally).?

Mondor is a spendthrift, while Aristus economizes. In the popular perception, Mondor might look like a benefactor of the public even as Aristus might be criticized for his miserliness.??

This perception, however, is founded on the seen.

As the paper explores the unseen, it’s clear that Aristus may, in fact, be the bigger benefactor of the public. “Political economy and morality, far from clashing, agree.”?

I would strongly recommend this paper to anyone interested in thinking differently about everyday issues.?

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Policy Intent Vs. Behavior?

In my writings too, I have often stumbled upon this idea (though I didn’t frame it in terms of “seen and the unseen” like Bastiat so excellently does).?

I have argued that prohibiting alcohol may temporarily solve a few societal and health problems. This is the visible part. It takes time to connect prohibition with the demand going underground, and leading to the funding of anti-social elements. In fact, prohibition in the US during the 1930s fueled the growth of the mafia.?

In this article, I argue 1993 Bombay Bombings were inadvertently caused by a person known for personal integrity. To save foreign exchange, Morarji Desai, as India’s Finance Minister in 1963, imposed gold control. The newly-minted law failed to impact a nation known for its insatiable appetite for gold, and the demand simply went underground. From this emerged underworld dons, who would later fund the Bombings.?

When India decided, as a matter of policy, to use indigenous materials for infra projects, its positives were obvious. The idea was to encourage use of local resources and talent, thus benefiting India. As I argue here, this policy, and its rigid application, was at least partly responsible for the Bhopal Gas Tragedy.?

For every road we choose, we are rejecting many other roads. Our analysis of the road we took cannot be complete unless we also think about how the alternatives would have panned out.