Home
/
RELIGION & LIBERTY ONLINE
/
The economics of Bedford Falls (Part 3 of 3)
The economics of Bedford Falls (Part 3 of 3)
Jun 4, 2025 2:33 PM

[Note: This is the finalpost in a series highlighting some of the financial aspects and broad economic lessons of Frank Capra’s holiday classic, It’s a Wonderful Life. You can find part one hereand part two here.]

Economist Don Boudreaux outlined ten foundational lessons that should be learned in every well-taught principles of economics course. Examples of nearly all of the ten lessons can be found in Capra’s Christmas classic, but for the sake of brevity I’ll merely highlight two of them.

Principle 1: The world is full of both desirable and undesirable unintended consequences – consequences that are largely invisible but that even a course in ‘mere’ principles of economics gives us great vision that enables us to “see”.

This holiday film may be attributed to Frank Capra, but it could have just as easily been called “Frederic Bastiat’s ‘It’s a Wonderful Life’.” The central theme of the film is a creative example of Bastiat’s “That Which is Seen, and That Which is Not Seen”—which is (as both Boudreaux and I claim) the most important essay in economics.

In the opening line of his essay, Bastiat writes,

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.

The film, of course, shows the effect not of laws or policy, but of people. When Ma Bailey gave birth to George she also gave “birth not only to an effect, but to a series of effects.”

George was able to see the effect of his existence on his own life but he did not have the foresight to truly see the effect he had on others. That’s where es in. He may be a guardian angel but he helped George by being a “good economist” and showing him the unseen effects of his life. “You’ve been given a great gift, George,” says Clarence. “A chance to see what the world would be like without you.”

Because of his life, George not only affected the people of Bedford Falls but affected the lives of people across the United States. As Clarence explains, if George wasn’t around to save his kid brother Harry, Harry wouldn’t have been around to save the hundreds of men who would have died on the troop transport in World War II.

The film teaches us that we often have an effect on the lives of others that are not seen. What we should also remember is that the effect people have can sometimes be mediated through laws and policies. That is why we need to constantly ask not only what unseen affect we are having on the lives of others, but what unseen effects the policies and laws we advocate for will have that we may not have considered.

Principle #2: Our world is unavoidably one of trade-offs and not “solutions.”

Whenever we make a decision about how we will spend our time, money, or other resources, we are making a trade-off, giving up one thing for another. This trade-off creates an opportunity cost, the cost of an alternative that must be forgone in order to pursue a certain action.

For example, George makes a trade-off in deciding to stay and work for the family business while his younger brother goes to college. He later makes a similar trade-off by agreeing to stay with pany so that his brother Harry can take a job in a more promising field. The opportunity cost for George is the college education he had to forgo and the jobs for adventurers (“Venezuela oil fields – wanted, man with construction experience. Here’s the Yukon, right here – wanted, man with engineering experience.”) he’ll never get to take by staying in Bedford Falls.

For most of the film, George is faced with nothing but trade-offs—ones he’d prefer not make. The opportunity costs he faces (such as turning down a job from Mr. Potter that would have paid $20,000 a year—$365,904 in 2015 dollars) are costly, both in terms of money and self-fulfillment. And yet he repeatedly make trade-offs that and benefit others more than him.

As I’ve written before, what makes George one of the most inspiring, plex characters in modern popular culture is that he continually chooses the needs of his family munity over his own self-interested ambitions and desires—and suffers immensely and repeatedly for his sacrifices.

Although sentimental, Capra’s movie is not a simplistic morality play. It’s true that the movie ends on a happy note late on Christmas Eve, when George is saved from ruin. But on Christmas Day he’ll wake to find that his life is not so different than it was when he wanted mit suicide.

Nothing much will change because there are no perfect “solutions” to what George should do with his life. He may have avoided the current crisis but another will arise again in the future. He will continue to face trade-offs in the future, some which are likely to require great sacrifices from him. But by the end of the film he has realized that the trade-offs he has made to benefit others are worth the opportunity cost he had to pay. That lesson, one we often need to learn for ourselves, is a key reason “It’s a Wonderful Life” endures both as a holiday classic and an exemplar of economics in film.

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
Would school choice help conservatives recover from the ‘cultural massacre’?
The Spectator Australia published an article Monday claiming that the “culture war” between conservative and liberal values is, in reality, a “cultural massacre.” The carnage is evident in the numbers, specifically in education: in the United Kingdom, conservatives make up only seven percent of primary school teachers and only eight percent of secondary school teachers. In the United States, conservatives often focus on the lack of intellectual diversity on university campuses. They are not wrong to worry. In September, the...
Reading ‘Democracy in America’ (Part 2): What did Tocqueville mean by ‘equality of condition’?
This is the second part in a series on how to read Alexis de Tocqueville’s “Democracy in America.” Read Part 1 and follow the entire series here. As we begin our study of Democracy in America, we bear in mind that the work’s distinguished author, Alexis de Tocqueville, blessed us with a clear, concise introduction to the two-volume work. The introduction is the most important chapter of the work in terms ing to grips with Tocqueville’s overall argument and purpose...
Can health care be left to the free market?
In one of the worst opinion pieces published in the New York Times in recent memory, Farzon A. Nahvi, an emergency medicine physician, argues the free market cannot provide health care because some patients arrive at the hospital unconscious: As an emergency medicine physician in a busy urban hospital, I have patients brought to me unconscious several times a day. Often, they are found down in the street by a good Samaritan who called 911 on their behalf. We are...
Dorothy Sayers, school choice, and long run student success
Today’s Wall Street Journal article on education choice, “New Evidence on School Vouchers,” might look oddly familiar for those of us who have read Dorothy Sayers’ The Lost Tools of Learning. The WSJ piece refers to two new studies that investigated student performance in states with voucher programs: Louisiana and Indiana. In Louisiana, a state with a program that allows for vouchers for private schools, 7,100 students attend private or religious schools. Meanwhile, over 34,000 students utilize Indiana’s statewide voucher...
American students: Raw material or individual persons?
Catherine Pakaluk The quality of K-12 education in America is a major concern. This is largely because, despite marginally high spending per student, the United States does pete very well against other countries on standardized tests. The economics of education particularly interested Catherine Pakaluk, who holds a doctorate in economics from Harvard and is an assistant professor of economics at Catholic University of America. Pakaluk gave a lecture, “Economics of Education,” on June 23 at Acton University. In this talk,...
Pulling out of Paris agreement is a ‘market distortion’: European leader
The G20 summit in Hamburg e to an end, and the dominant story remains America’s withdrawal from the Paris climate agreement. It’s been less reported that some European leaders have implied that the EU should take economic revenge on the U.S. because – in their words – limiting government intervention in the economy is a “market distortion.” Germany currently holds the presidency of the G20 summit, with Chancellor Angela Merkel overseeing the violence-plagued event. The final declaration notes the U.S....
Is it cleaner to trade pollution?
Note: This is post #40 in a weekly video series on basic microeconomics. In an effort to reduce pollution, the government tried two policy prescriptions under the Clean Air Act Amendments of 1990, notes Alex Tabarrok of Marginal Revolution University. The mand and control—mandated that each power plant lower its pollution by a determined amount. However, different firms face different cost curves and, because information is dispersed, policymakers don’t always know those costs. The second policy prescription—tradable pollution permits—empowered firms...
The ‘end’ of work
In the Q&A part of a session I led at last month’s Acton University on Abraham Kuyper and Leo XIII(based on this recent volume), I was asked about specific areas where the two figures have something concrete to contribute today. One theme I highlighted was to their shared emphasis on the centrality and dignity of human work. Today there is a great deal of anxiety over the future of work in an age of increasing globalization, automation, and structural changes...
How ordinary economic thinking helps constrain political chaos
In an age where chaos and cronyism seem to be the defining characteristics of our politics, and where the political system is increasingly decried as being “rigged” by populists from both the left and right, the time seems ripe for a renewed focus on political constraints. When such concerns arise, we are quick to point back to the U.S. Constitution, and rightly so. Yet economist Peter Boettke sees another guide that can also offer some value. For Boetkke, our politics...
Macron’s African statement ignores human ingenuity
A French media outlet has captured an otherwise ment from French President Emmanuel Macron that Africa is overpopulated. When asked about a possible “Marshall Plan for Africa,” Macron listed among the continent’s current problems the need for “demographic transition,” lamenting the fact that some African “countries still haveseven to eight children per woman.” His concerns seem particularly worth examining today on World Population Day. During a July 8 press conference about the G20 summit, Macron began by naming truly concerning...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved