That Which is Seen, and That Which is Not Seen

I walk along the city streets, you used to walk along with me
And every step I take reminds me of just how we used to be
--Naked Eyes

Thomas Sowell reminds us that creating particular jobs, as boasted by the current president on his campaign trail, does not create net jobs. His observations are applications of Bastiat's (1850) principle of That Which is Seen, and That Which is Not Seen, which was later famously elaborated by Henry Hazlitt.

Sowell astutely observes that the government could create one million jobs tomorrow simply by hiring that many unemployed people. That is typically what people would see, or at least what politicians hope they would see.

But money to pay those people comes from private hands - hands that did not see an economic reason for hiring those people. Thus, capital that stood ready to be deployed when the risk/reward profile was deemed positive was instead consumed in the near term political name of 'job creation.' Absent the capital for projects that increase productivity, large numbers of future jobs are never created. That is typically what people don't see.

Sowell points out that one net effect on jobs currently is that the fraction of working age people without a job has fallen to its lowest level in decades. Moreover, the 'headline' unemployment number does not include 'discouraged' workers - those who have reportedly ceased looking for work. If those people were included in the headline jobless number, unemployment would be double the current 8%+ number that makes the front pages.

If everyone gave up looking for job, Sowell observes, then the headline unemployment number would fall to zero. But that would hardly solve our problem.

The principle of That Which is Seen, and That Which is Not Seen is a fundamental building block of economic logic.