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CLAUDE FREDERIC BASTIAT was a French
economist, legislator, and writer who championed private property, free
markets, and limited government. Perhaps the main underlying theme of Bastiat's writings was that the free market was
inherently a source of "economic harmony" among individuals, as
long as government was restricted to the function of protecting the lives,
liberties, and property of citizens from theft or aggression. To Bastiat, governmental coercion was only legitimate if it
served "to guarantee security of person, liberty, and property rights,
to cause justice to reign over all."[1]
Bastiat emphasized the plan-coordination function of the free market, a major
theme of the Austrian School, because his thinking was influenced by some of
Adam Smith's writings and by the great French free-market economists
Jean-Baptiste Say, Francois Quesnay, Destutt de
Tracy, Charles Comte, Richard Cantillon (who was
born in Ireland and emigrated to France), and Anne Robert Jacques Turgot.
These French economists were among the precursors to the modern Austrian
School, having first developed such concepts as the market as a dynamic, rivalrous process, the free-market evolution of money,
subjective value theory, the laws of diminishing marginal utility and
marginal returns, the marginal productivity theory of resource pricing, and
the futility of price controls in particular and of the government's economic
interventionism in general.
Bastiat's Intellectual Background
Bastiat was orphaned at age ten, and was raised and educated by his paternal
grandparents. He left school at age seventeen to work in the family exporting
business in the town of Bayonne, where he learned firsthand the evils of
protectionism by observing all the closed-down warehouses, the declining
population, and the increased poverty and unemployment caused by trade
restrictions.
When his grandfather died, Bastiat, at age twenty-five, inherited the family estate
in Mugron, which enabled him to live the life of a
gentleman farmer and scholar for the next twenty years. Bastiat
hired people to operate the family farm so he could concentrate on his intellectual
pursuits. He was a voracious reader, and he discussed and debated with
friends virtually all forms of literature. His closest friend was his
neighbor, Felix Coudroy. "Coudroy
and Bastiat, worked their way through a tremendous number of books on
philosophy, history, politics, religion, travel, poetry, political economy,
biography, and so on. . . . It was in these conversations that the ideas of Bastiat developed and his thoughts matured."[2]
Coudroy was initially a follower of Rousseau and, like most of Rousseau's
admirers, then as now, was a socialist. But Bastiat,
who always said he preferred a one-on-one conversation to giving a speech to
thousands of people, converted Coudroy to classical
liberalism.
Bastiat's first published article appeared in April of 1834. It was a response
to a petition by the merchants of Bordeaux, Le Havre, and Lyons to eliminate
tariffs on agricultural products but to maintain them on manufacturing goods.
Bastiat praised the merchants for their position on
agricultural products, but excoriated them for their hypocrisy in wanting
protectionism for themselves. "You demand privilege for a few," he
wrote, whereas "I demand liberty for all."[3] He then explained why all
tariffs should be abolished completely.
Bastiat continued to hone his arguments in favor of economic freedom by
writing a second essay in opposition to all domestic taxes on wine, entitled
"The Tax and the Vine," and a third essay opposing all taxes on
land and all forms of trade restrictions. Then, in the summer of 1844, Bastiat'sent an unsolicited manuscript on the effects of
French and English tariffs to the most prestigious economics journal in
France, the Journal des Economistes.
The editors published the article, "The Influence of English and French
Tariffs," in the October 1844 issue, and it unquestionably became the
most persuasive argument for free trade in particular, and for economic
freedom in general, that had ever appeared in France, if not all of Europe.
In this article, Bastiat
first displayed his mastery of the accumulated wisdom of the economists of
the pre-Austrian tradition, and established himself as a brilliant
synthesizer and organizer of economic ideas. He immediately gained national
and international fame and, as a fellow advocate of free trade, began a
friendship with Richard Cobden, the leader of the British Anti-Corn Law
League, which succeeded in abolishing all trade restrictions in England by
1850. Bastiat organized a similar organization in
France the French Free-Trade Association which was instrumental in France's
elimination of most of its trade barriers in 1860, ten years after Bastiat's death. Bastiat was
especially effective in spreading his influence as editor of the Free Trade
Association's newspaper, Le Libre-Exchange.
After twenty years of intense
intellectual preparation, articles began to pour out of Bastiat,
and soon took the form of his first book, Economic Sophisms,
which to this day is still arguably the best literary defense of free trade
available.[4] He quickly followed with his
second book, Economic Harmonies,[5]and his articles were reprinted in
newspapers and magazines all over France. In 1846, he was elected a
corresponding member of the French Academy of Science, and his work was
immediately translated into English, Spanish, Italian, and German. Free-trade
associations soon began to sprout up in Belgium, Italy, Sweden, Prussia, and
Germany, and were all based on Bastiat's French
Free Trade Association.
Bastiat's Austrian School Ideas
While Bastiat
was shaping economic opinion in France, Karl Marx was writing Das Kapital, and the socialist notion of "class
conflict" that the economic gains of capitalists necessarily came at the
expense of workers was gaining in popularity. Bastiat's Economic
Harmonies explained why the opposite is true that the interests of
mankind are essentially harmonious if they can be cultivated in a free
society where government confines its responsibilities to suppressing
thieves, murderers, and special-interest groups who seek to use the state as
a means of plundering their fellow citizens.
Capital Theory
Bastiat contributed to Austrian capital theory by masterfully explaining how
the accumulation of capital results in the enrichment of the workers by
raising labor s marginal productivity and, consequently, its remuneration.
Capital accumulation, wrote Bastiat, would also
result in cheaper and better quality consumer goods, which would also raise
real wages. He also explained how the interest on capital declines as it
becomes more plentiful.
Thus, the interests of capitalists and
labor are indeed harmonious, and government interventions into capital
markets will impoverish the workers as well as the owners of capital. Bastiat also explained why in a free market no one can
accumulate capital unless he uses it in a way that benefits others, i.e.,
consumers. In reality, wrote Bastiat, capital is
always used to satisfy the desires of people who do not own it. In sharp
contrast to most of his predecessors, Bastiat
believed that "it is necessary to view economics from the viewpoint of
the consumer. . . . All economic phenomena . . . must be judged by the
advantages and disadvantages they bring to the consumer."[6] Mises
repeated this point in Human Action when he noted that although bankers may seem
to "control" the allocation of capital by their day-by-day
decisions, it is the consumers who are the "captains" of the
economic ship, because it is their preferences to
which successful businesses cater.
Subjective Cost
Bastiat's greatest contribution to subjective value theory was how he
rigorously applied the theory in his essay, "What is Seen and What is
Not Seen."[7] In that essay, Bastiat, by relentlessly focusing on the hidden
opportunity costs of governmental resource allocation, destroyed the
proto-Keynesian notion that government spending can create jobs and wealth.
In the first edition of Economics in One Lesson,Henry Hazlitt
wrote that: "My greatest debt, with respect to the kind of
expository framework on which the present argument is hung, is Frederic Bastiat's essay, "What is Seen and What is Not
Seen." The present work may, in fact, be regarded as a modernization,
extension and generalization of the approach found in Bastiat's
pamphlet."[8]
The Science of Human Action
The way in which Bastiat
described economics as an intellectual endeavor is virtually identical to
what modern Austrians label the science of human action, or praxaeology. Bastiat wrote in
his Harmonies of how "The subject of political economy
is MAN . . . [who is] endowed with the ability to compare, judge, choose, and
act. . . . This faculty . . . to work for each other, to transmit their
efforts and to exchange their services through time and space . . . is
precisely what constitutes Economic Science."[9]
As with contemporary Austrians, Bastiat viewed economics as "the Theory of
Exchange" where the desires of market participants "cannot be
weighed or measured. . . . Exchange is necessary in order to determine
value."[10] Thus, to Bastiat,
as with contemporary Austrians, value is subjective, and the only way of
knowing how people value things is through their demonstrated preferences as
revealed in market exchanges. Voluntary exchange, therefore, is necessarily
mutually advantageous. This was an important theoretical innovation in the
history of economic theory, for many of the British economists had succumbed
to the "physical fallacy" the misguided notion that value is determined
by the production of physical objects alone.
The understanding that value is
created by voluntary exchange, Murray Rothbard pointed out, "led Bastiat and the French school to stress the ways in which
the free market leads to a smooth and harmonious organization of the
economy."[11] Rothbard
himself developed Bastiat's subjectivist theory of
exchange much more fully a century later in his devastating critique of
modern welfare economics.
Another Rothbardian
theme in Bastiat's work (or a Bastiat
theme in Rothbard's work) has to do with land rent.
In Bastiat's time, socialists made the argument
that no one was entitled to land rent because it was God, after all, who
created the land, not the current landowners. Bastiat's
response was that land rent was indeed legitimate because landowners have
rendered a valuable service by clearing the land, draining it, and making it
suitable for agriculture. If all these investment costs are capitalized,
explained Bastiat, then it is clear that landowners
were not earning an exceptional income through land rent after all, but were
providing a valuable public service. Murray Rothbard
would later develop this idea more fully in his defense of
"homesteading" as an appropriate means of establishing property
rights.
Governmental Plunder
While establishing the inherent
harmony of voluntary trade, Bastiat also explained
how governmental resource allocation is necessarily antagonistic and
destructive of the free market s natural harmony.
Since government produces no wealth of its own, it must necessarily take from
some to give to others robbing Peter to pay Paul is the essence of
government, as Bastiat described it. Moreover, as
special-interest groups seek more and more of other peoples money through the aegis of the state, they
undermine the productive capacities of the free market by engaging in
politics rather than in productive behavior. "The state," wrote Bastiat,
"is the great fictitious entity by which everyone seeks to live at the
expense of everyone else."[12]
Bastiat is perhaps best known for his work in the field of political economy
the study of the interaction between the economy and the state as opposed to
pure economic theory. He sought to understand how the state operated what
incentives drive it and he did so as well as anyone ever has. There is no
space here for a in-depth
discussion of Bastiat's ideas on political economy,
but a few examples will suffice. Government was necessary, according to Bastiat, but only if restricted to its
"essential" functions. He believed that "no society can exist
unless the laws are respected to a certain degree," but at the same time
that could only occur if the laws themselves were respectable.[13]
The moral justification for a law,
moreover, can never be based on a majority vote, because "since no
individual has the right to enslave another individual, then no group of
individuals can possibly have such a right."[14] All income redistribution
through majoritarian democracy is therefore "legal plunder" and is,
by definition, immoral.
The slogan, "if goods don t cross borders, armies will," is often attributed to Bastiat because he so forcefully made the case that free
trade was perhaps the surest route to peace as well as prosperity. He
understood that throughout history, tariffs had been a major cause of war.
Protectionism, after all, is an attempt by governments to inflict on their
own citizens in peacetime the same kinds of harm their enemies
attempt (with naval blockades) during wars.
Competitive Discovery
Bastiat understood that free-market competition was a "dynamic discovery
procedure," to use a Hayekian phrase, in which individuals strove to
coordinate their plans to achieve their economic goals. All forms of
government intervention interrupt and distort that process because once a law
or regulation is issued, "the people no longer need to discuss, to
compare, to plan ahead; the law does all this for them. Intelligence becomes
a useless prop for the people; they cease to be men; they lose their
personality, their liberty, their property."[15]
Phony Altruism
Bastiat also saw through the phony "philanthropy" of the socialists
who constantly proposed helping this or that person or group by plundering
the wealth of other innocent members of society through the aegis of the
state. All such schemes are based on "legal plunder, organized
injustice."[16]
Like today's neo-conservatives,
nineteenth-century socialists branded classical liberals with the name
"individualist," implying that classical liberals are opposed to
fraternity, community, and association. But, as Bastiat
astutely pointed out, he (like other classical liberals) was only opposed to
forced associations, and was an advocate of genuine, voluntary communities and
associations. "[E]very time we object to a thing being done by
government, the socialists [mistakenly] conclude that we object to its being
done at all."[17]
Natural Rights and Freedom of Exchange
Bastiat can also be seen as a link between the seventeenth- and
eighteenth-century natural- rights theorists and some members of the modern
Austrian School, most notably Murray Rothbard, who
based their defense of free markets on natural rights, rather than merely on
utilitarian arguments.[18] To Bastiat,
collectivism in all its forms was both morally reprehensible (being based on
legalized theft) and an impediment to the natural harmonization of human
interests that is facilitated by free markets and
private property.
Bastiat not only believed that collectivism constituted legal plunder; he
also believed that private property was essential to fulfill man's nature as
a free being who, by nature, acts in his own self-interest to satisfy his
(subjective) wants. To argue against the right to private property would be
to argue that theft and slavery were morally "correct." Thus, the
protection of private property is the primary (if not the only legitimate)
function of government. The politician has "no authority over our
persons and our property, since they pre-exist him, and his task is to
surround them with guarantees."[19]
Bastiat authored what is to this day the strongest defense of free trade ever
produced. His case was built on myriad economic concepts, but what the case
for free trade really comes down to, "has never been a question of
customs duties, but a question of right, of justice, of public order, of
property. Because [government-created] privilege, under whatever form it is
manifested, implies the denial or the scorn of property rights." And
"the right to property, once weakened in one form, would soon be
attacked in a thousand different forms."[20]
In Economic Sophisms, Bastiat masterfully created the most complete case for
free trade ever constructed up to that time, which applied such economic
concepts as the mutual advantage of voluntary trade, the law of comparative
advantage, the benefits of competition to the producer as well as the
consumer, and the historical link between trade barriers and war. Free trade,
Bastiat explained, would mean "an abundance of
goods and services at lower prices; more jobs for more people at higher real
wages; more profits for manufacturers; a higher level of living for farmers;
more income to the state in the form of taxes at the customary or lower
levels; the most productive use of capital, labor, and natural resources; the
end of the "class struggle" that . . . was based primarily on such
economic injustices as tariffs, monopolies, and other legal distortions of
the market; the end of the "suicidal policy" of colonialism; the
abolition of war as a national policy; and the best possible education,
housing, and medical care for all the people."[21]
Bastiat was a genius at explaining all these economic principles and outcomes
by the use of satire and parables, the most famous of which is "The Candlemaker's Petition," which "requested"
a law to mandate "the covering of all windows and skylights and other
openings, holes, and cracks through which the light of the sun is able to
enter houses. This free sunlight is hurting the business of us deserving
manufacturers of candles."
Another of Bastiat's
most memorable satires is his destruction of the protectionist argument that
a "balance of trade" is necessarily desirable. A French merchant is
said to have shipped $50,000 worth of goods to the U.S., sold them for a
$17,000 profit, and purchased $67,000 worth of U.S. cotton, which he then
imported into France. Since France had therefore imported more than it
exported, it "suffered" an "unfavorable" balance of
trade. A more "favorable" situation, Bastiat'sarcastically
wrote, would have been one where the merchant attempted a second transaction
in the U.S., but had his ship sunk by a storm as it left the harbor. The
customs house at the harbor would therefore have recorded more exports than
imports, creating a very "favorable" balance of trade. But since
storms are undependable, Bastiat reasoned, the
"best" policy would be to have the government throw all the
merchants goods into the sea as they left French harbors, thereby
guaranteeing a "favorable balance of trade"! It is this kind of
display of literary genius that must have motivated Henry Hazlitt to take up Bastiat's
fallen mantle a century after his death.
Bastiat's Intellectual Legacy
Bastiat's writing constitutes an intellectual bridge between the ideas of the
pre-Austrian economists, such as Say, Cantillon, de
Tracy, Comte, Turgot, and Quesnay, and the Austrian tradition of Carl Mengerand his students. He was also a model of scholarship for those Austrians
who believed that general economic education especially the kind of economic
education that shatters the myriad myths and superstitions created by the
state and its intellectual apologists is an essential function (if not duty)
of the economist. Mises
was a superb role model in this regard, as were Henry Hazlitt
and Murray Rothbard, among other Austrian
economists. As Mises said, the early economists
"devoted themselves to the study of the problems of economics," and
in "lecturing and writing books they were eager to communicate to their
fellow citizens the results of their thinking. They tried to influence public
opinion in order to make sound policies prevail."[22]
To this day, Bastiat's
work is not appreciated as much as it should be because, as Murray Rothbard explained, today's intemperate critics of
economic freedom "find it difficult to believe that anyone who is
ardently and consistently in favor of laissez-faire could possibly be an
important scholar and economic theorist."[23] It is bizarre that even some
contemporary Austrian economists seem to believe that the act of
communicating economic ideas especially economic policy ideas to the general
public is somehow unworthy of a practitioner of "economic science."
For that is exactly the model of scholarship that Mises
himself adopted, which was carried forward most aggressively and brilliantly
by Murray Rothbard, all in the tradition of the
great French Austrian economist, Frederic Bastiat.
Readings
Bastiat, Frederic. 1995. selected="true"="true"
Essays on Political Economy. George B. de Huszar,
ed. Irvington-on-Hudson, N.Y.: Foundation for Economic Education.
----1966. Economic Sophisms.
Irvington-on-Hudson, N.Y.: Foundation for Economic Education.
----1966. Economic Harmonies.
Irvington-on-Hudson, N.Y.: Foundation for Economic Education.
Hazlitt, Henry. 1946. Economics
in One Lesson. New York: Harper and Brothers.
Mises, Ludwig von. 1963. Human Action: A Treatise on Economics.
3rd rev. ed. Chicago: Henry Regnery.
Rothbard, Murray. 1995. Classical Economics. Vol. 2. An
Austrian Perspective on the History of Economic Thought. Cheltenham,
U.K.: Edward Elgar.
Russell, Dean. 1969. Frederic Bastiat: Ideas and Influence. Irvington-on-Hudson,
N.Y.: Foundation for Economic Education.
NOTES
[1]Frédérick
Bastiat, "The Law," in selected="true"="true"
Essays on Political Economy, George B. de Huszar,
ed. (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1995), p.
52.
[2]Dean Russell, Frédérick Bastiat:
Ideas and Influence (Irvington-on-Hudson, N. Y.: Foundation for
Economic Education, 1969), pp. 22-23.
[3]Ibid., p. 24.
[4]Frédérick Bastiat, Economic
Sophisms (Irvington-on-Hudson, N.Y.: Foundation for Economic
Education, 1966).
[5]Frédérick Bastiat, Economic
Harmonies (Irvington-on-Hudson, N.Y.: Foundation for Economic
Education, 1966).
[6]Russell, Ideas
and Influence, p. 32.
[7]Bastiat, "What is Seen and What is Not Seen,"
in selected="true"="true" Essays, pp.
1-50.
[8]Henry
Hazlitt, Economics in One Lesson (New York: Harper and
Brothers, 1946), p. 1.
[9]Bastiat, Economic Harmonies, P. 35.
[10]Ibid., p. 36.
[11]Murray
N. Rothbard, Classical Economics, vol.
2, An Austrian Perspective on the History of Economic Thought (Cheltenham,
U.K.: Edward Elgar, 1995), p. 446.
[12]Bastiat, selected="true"="true"
Essays, p. 144.
[13]Russell, Ideas
and Influence, p. 5.
[14]Ibid.
[15]Ibid., p. 11.
[16]Ibid.
[17]Ibid., p. 12. Also, see Bastiat's
essay, "Justice and Fraternity," in selected="true"="true"
Essays, pp. 116-39.
[18]Because
Hayek's defense of liberty was based largely on expediency (does it promote
the efficient use of knowledge in society?) and utilitarianism (do
"social" benefits outweigh "social" costs, as determined
by an "impartial judge"?), he came to endorse virtually all of the
government interventions that define the American (or Swedish) welfare state.
This is something natural-rights-based theorists, such as Rothbard
and Bastiat, would never have done.
[19]Bastiat, "Property and Law," in selected="true"="true"
Essays, pp. 97-115.
[20]Ibid., p. 111.
[21]Russell, Ideas
and Influence, p. 42.
[22]Ludwig
von Mises, Human Action: A Treatise on
Economics, 3rd rev. ed (Chicago: Henry Regnery,
1963), p. 869.
[23]Rothbard, Classical Economics,
p. 449.
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