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Socially Responsible Corporations: The Seen and the Unseen: Dwight R. Lee
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The difficulty in correctly identifying a socially responsible firm is an example of a broader problem in making sound economic judgments: the need to take into consideration all the effects of economic decisions—not just those that are easily seen but also those that typically go unseen. French economist Frederic Bastiat first discussed this problem in his 1850 article "What is Seen and What is Not Seen."1 Bastiat begins his article with a story of a broken window and the tendency for people to say that, although unfortunate, the broken window is good for the economy because it creates work for glaziers (glass fitters). We still hear such statements after natural disasters. We are usually better off repairing the damage than not doing so, but that doesn't mean that the disaster itself was good for the economy. Indeed, if disasters were good for the economy, they would probably not be called "disasters." Bastiat's point is that the employment created by the broken window is easily seen, but what is unseen is the value sacrificed because the effort and resources needed to fix the window would have been used to produce additional desirable things if the window had not been broken. A similar problem of the seen and the unseen explains why corporations are often mistakenly credited with being socially responsible: they receive credit for things that are easily seen, while their harmful activities, which are often much more extensive, go unmentioned. Of course, some corporations are socially responsible, both in the seen and the unseen. But many are not.