I remember my first car accident vividly. I was making a left hand turn out of the parking lot and didn’t come to a complete stop. I was already turning when I saw the blue F-150 driving straight towards me. I stepped on my brakes. Too late. My body jolted forward as the F-150 hit my little black car. Sitting in the front seat, I tried to contain the rising panic, my hands shaking. What would my parents think? If only I had waited just half a second longer…
The accident crushed my front axle and left my front tire useless. I knew that the car was not worth the repairs. From driver’s ed, I had learned about the potential emotional costs following a collision. But driver’s ed had taught me nothing about the unseen costs. I did not fully understand the cost of no longer having a car. I didn’t have the money to buy a new car! This was not the only unforeseen cost – my car insurance payments dramatically increased thereafter. That careless rolling stop became some of the most costly seconds of my life.
It’s easy to know what I did wrong after the fact. Hindsight is always 20/20. After the accident, I became a (slightly) more cautious driver. Experience is the best teacher. But experience is costly. It hurt to learn those costs firsthand.
Frédéric Bastiat, the 19th century French economist, wrote about costs, both seen and unseen. He defined seen costs as easy to identify, easy to take into account, and usually easy to avoid. Whereas unseen costs, he wrote, are a lot more difficult to foresee. They’re sneaky, hard to avoid, and not obvious. Most of the time, we don’t realize these costs until after it’s too late.
Bastiat wasn’t the first economist to study costs, but he was the first to popularize the concept through his satires about broken windows and negative railroads. He tried to analyze how we can learn to be more aware of these unseen costs through gaining experience and foresight. He writes in Selected Essays on Political Economy:
Experience teaches efficaciously, but brutally. It instructs us in all the effects of an act by making us feel them, and we cannot fail to learn eventually, from having been burned ourselves, that fire burns. I should prefer, in so far as possible, to replace this rude teacher with one more gentle: foresight.
Costs are all around us. Both seen and unseen. The unseen are harder to evaluate, simply because they are not obvious. The trick is accurately assessing them through deeper thinking. We can look beyond the obvious and ask, “And then what?” to discover the unseen.
The unseen costs of my car accident were painful. Looking back, I wish I could have avoided these costs. Unfortunately, I had to learn from experience instead of the foresight. Now I drive knowing the costs of an accident. I am more aware of other cars around me. I am more aware of the possibility of a crash than I was ever before. Experience taught me to be more aware of the potential costs. When I’m running late and want to drive just a little bit faster, I think of all the unseen costs associated with a crash and keep myself from speeding.
Counting unseen costs takes time and, as Bastiat writes, is “man’s necessarily painful evolution.” Life is a learning process. It can be painful learning from experience, but the more we experience, the better we can avoid the costs that were hidden to us previously. Learning from others’ experiences can also help us foresee some unseen costs. We can watch others suffer the consequences and try to avoid their mistakes when we come across similar circumstances. However, no matter how much foresight we have, each situation is different (whether in actuality or merely in perception). Others’ experiences may not apply and cannot always help us avoid the unseen costs. There are always costs to our behavior and decisions. Some that we will avoid through foresight and experience and others where we will have to pay the cost.
This is the essential quest of economics: studying what was previously unknown, previously unforeseeable and making it known. In this way, learning does not have to be a painful experience. I’d gladly spend more time thinking about the unseen costs if it meant I wouldn’t have to pay for them. Please let my experience become your foresight! It’ll be a lot less painful, I promise you.