The Beacon Center of Tennessee, a pro-market think tank, released a new short (19 minute) film, entitled Rigged: The Injustice of Corporate Welfare. It discusses the use of targeted tax incentives to lure IKEA into the Memphis (TN) area, at the expense of smaller furniture companies not allowed the same incentives. It’s a classic case of what economist Frédéric Bastiat called “the seen and the unseen” effects of economic policy. The introduction of IKEA is given great fanfare, but the damaging effect on other furniture stores of IKEA’s exclusively low tax rate is unseen and given no attention at all.
As Bastiat put it: “In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause — it is seen. The others unfold in succession — they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference — the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee.”