Milton Friedman – Seen vs the Unseen

Professor Friedman explains why the majority of Americans are not represented in the crony capitalistic system that prevails in America. Source: LibertyPen YouTube channel.

Transcript:

One of the great economists of the 19^th century was Alfred Marshall. And he has a sort of motto for one of his books. 'The seen and the unseen.' And it's a marvelous motto for this. What happens in economics over and over again is that there are two sets of effects of any interaction: the immediately visible effects, and the widespread invisible effects. And the widespread invisible effects are often much more important than the visible ones. But people don't see them.

Let me give you a simple examples. We have a quota on the amount of sugar that can be imported from various countries. The visible effect of that is that there are about couple of thousands growers of beet sugar, who benefit greatly from it, who are able to keep growing beet sugar. They don't benefit so greatly, because most of the money goes into paying the expenses of growing the beets. And indeed, if there were no such quotas, they would find something else to do. But who believe, in the short run, appear that visible effect is that they are able to have a market that they would otherwise not have. The invisible effect is that every consumer in the United States pays twice as much for the sugar he or she buys as the world price.

Now, you are a consumer. How much attention do you pay to the fact that you pay twice as much for sugar as you ought to? Is the fact that you pay twice as much for sugar than you ought to going to lead you down to Washington to testify against the sugar quota? But are the beet sugar farmers going to go down to Washington to testify in favor of the sugar quota? It's a typical example of the seen versus the unseen. The concentrated visible versus the dispersed invisible. And the major reason why roughly half of the income of this country is controlled by governmental agencies instead of by the people who earn it, is because of this contrast between the visible and the invisible.

We talk about a majority government. It is a majority government, but it's a very funny kind of a majority. It's a majority made up of a whole bunch of minorities. You've got one tenth of one percent of people who are beet sugar growers. They are part of this majority. You got another maybe one of two percent of the people who are in the textile industry, and they make us twice the world price for shirts and for other things, because of textile tariffs and textile agreement around the world. And so down the line, you got all these special interests. You got labor unions, you got these and those. Each one separately is a minority, but they all get together. Each minority is more interested in its own little problem than in what happens for the rest of the country. And so each one will give its vote to the other thing, it's a case of logrolling. So what we have is a logrolling majority, in which the majority of the people are not in fact represented.

Is there any doubt in your mind, suppose you are able to get an effective poll from the people at large on this question. The government imposes quotas on the import of sugar. The result of that is that x-thousand farmers are able to grow beet sugar, or otherwise would not. And that you are paying twice the world price for sugar. Are you in favor of this? Is there any doubt in your mind that a majority would say they are opposed to it?