The Flawed Logic of Bailouts

by Gene Callahan

I am periodically re-astonished at the brilliance of Frédéric Bastiat. His satire “The Candlemaker’s Petition” is perhaps the most brilliant send-up of protectionism ever penned. And, listening to the news on the radio today, I again was made aware of how important but, apparently, difficult to grasp, is Bastiat’s point about “what is seen and what is unseen.”

What brought that point of Bastiat’s to my mind is the recent media focus on the proposed bailout of the US automakers. It is certainly the case that, if the government provides the US automakers with oodles of greenbacks they would not otherwise have had, then the automakers are more likely to make it through this recession. That, in Bastiat’s formulation, is “what is seen.” However, “what is not seen” is all of the other businesses that will fail as a result of that bailout. Continue reading