The contrast in this saying is between a wise or sensible person and someone who is simple or ignorant: the wise person learns from instruction, but the ignorant person learns (only) by seeing other people punished.
“When a scoffer is punished, the simple becomes wise”: This line expresses the same thought as the first line of 19.25. “A scoffer” is someone who scorns or mocks others, who has a scornful or conceited attitude. “The simple” is someone whose mind is empty, who lacks wisdom. For comments on both these terms see 1.22. Since “the simple” is a person who needs wisdom, “becomes wise” is a good rendering of the Hebrew verb here; some other ways of expressing the sense are “grow wiser” (New Jerusalem Bible), “gain wisdom” (New International Version), and “learns a lesson” (Scott, Good News Translation). The meaning of the whole line is that when a person who scorns or despises others is punished, this is a warning or a lesson to people who do not have much sense. What is not stated directly, but is probably also intended here, is that these people cannot or will not learn from instruction, unlike the wise people who are referred to in the next line. This meaning is brought out by a rendering like “The simple learns a lesson only when. . .” (Scott), and also by the use of a word like “but” in the next line (as in New Jerusalem Bible) to express the sense of contrast with the way that a wise or experienced person learns.
“When a wise man is instructed, he gains knowledge”: This line is parallel with the previous line. “A wise man” matches and contrasts with “the simple” there; and “gains knowledge” has the same sense as “becomes wise” there. In the case of the wise person, getting knowledge or wisdom comes through being “instructed”, that is, from being taught.
Quoted with permission from Reyburn, William D. and Fry, Euan McG. A Handbook on Proverbs. (UBS Helps for Translators). New York: UBS, 2000. For this and other handbooks for translators see here .

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