One of Frederic Bastiat‘s most basic, and most important, insights is the distinction between the seen and the unseen. In what is arguably his most famous essay, “What is Seen and What is Not Seen,” he wrote:

In the sphere of economics an action, a habit, an institution or a law engenders not just one effect but a series of effects. Of these effects only the first is immediate; it is revealed simultaneously with its cause, it is seen. The others merely occur successively, they are not seen; we are lucky if we foresee them.

The entire difference between a bad and a good Economist is apparent here. A bad one relies on the visible effect while the good one takes account both of the effect one can see and of those one must foresee.

Earlier this week, I was watching Danny DeVito’s character Lawrence Garfield give his famous speech in which he tries to persuade shareholders to vote to sell him majority ownership of New England Wire and Cable so that he can liquidate the company because it’s worth more dead than alive.

Prior to Garfield’s speech, Gregory Peck’s character Andrew Jorgensen, chairman of the company, is trying to persuade shareholders not to vote to sell majority ownership to Garfield.

Watching their speeches for the nth time, I realized that they are the perfect illustration of Bastiat’s seen and unseen. Jorgensen is telling the audience of the seen: the company they know, the relationships they have with each other, the nice history they have had with the company and maybe with some of the workers. That’s all seen because it’s tangible; it’s visible.

We often hear and read that Garfield is simply talking about money and how to maximize profit. He is talking about that. But pay attention to his speech and you see that he is talking about his own vision, his vision of the seen, that he makes tangible to his audience. If the company is liquidated, he tells his audience, there will be new uses for the money they save. Those uses aren’t seen now but they will be seen. Check the part that starts at about 4:00.

BTW, DeVito’s speech is one of my all-time favorites. When I was watching it, I found myself saying most of the words out loud before he got to them.