Bastiat, a Fine Political Economist

[Originally published in the Front Range Voluntaryist, article by Mike Morris]

Upon throwing around the idea of breaking down chapters of Frédéric Bastiat’s Economic Harmonies to advance the cause of liberty, which we have begun to do here, published as Hegemony and Spontaneity by Scott Albright (and continued in this issue), I decided to pick up the book and read its first chapter in order to follow along the series of summaries he will be offering. Though not to trample on his work, it inspired me to make a few mentions on this chapter too, on Natural and Artificial Organization as Bastiat saw it, which offers many insights in a short twenty pages. Not to jump the gun; I’m going to read and learn as Scott Albright condenses. But Bastiat gives us a lot to think about.

Though most widely known for The Law, a classic essay—the thesis being that once a government “perverts” the law, meant to protect life, liberty, and property, into instead a system of “plundering” each other’s property, that it is no longer a legitimate law—that many cite as turning them on to a love of liberty, Bastiat was far more sophisticated than this. His specialty was putting these basic truths of the natural world into witty arguments to reveal the flaws of his adversaries.

Though as far as I know not offering anything necessarily original, he excelled at marketing liberty to the common man. Known in his writing style for wit and sarcasm, easily dispensing of absurdities in economics by asking rhetorical questions to the reader, he does an excellent job at conveying economics to the layman; a task we are still in great need of today. In this, he has done more than he knew for the present-day liberty movement, still living in our minds today.

Bastiat spent a lot of his time fighting the protectionists and socialists of his day, but there’s a lot more that can be gathered from reading this mid-19th century writer, who died in 1850 while still attempting to crank out works to change the people’s minds and inspire in them liberty. Though writing over a century-and-a-half ago, such powerful words would be just as sufficient today in refuting the claims of protectionists, such as of economic-nationalist Donald Trump and his proposals for tariffs on imported goods, as they were back then.

A notable example of his comedic delivery of economics is his famous petition of the candlestick makers to express the fallacies behind trade protectionism. He is writing on behalf of the industry of the candlestick makers, who have fierce competition, he says, and are in need help protecting their business. Their competitor is “is none other than the sun”; and the government should be “so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull's-eyes, deadlights, and blinds.” Of course, it’s a joke; but so are their protectionist schemes.

And in addition, since then “thousands of vessels will engage in whaling”, they will “in a short time…have a fleet capable of upholding the honour of France.” Think, Make America Great Again: they think protectionist policies could bring back the glory of a once-great nation, apparently. As far as the Trump-era continuing these fallacies, and looking for excuses to defend to them, well, “there is not a single one of them that you have not picked up from the musty old books of the advocates of free trade.” These things have been refuted long ago, but persist nonetheless. He pointed out that their efforts to protect the producers runs into a problem: producers, in order to secure higher profits, contrary to the consumer’s wishes of abundance, prefer scarcity. This is why they turn to government: to squash potential competitors who may drive down [their] prices.

But his emphasis always on the unseen effects of policies is one thing that made him exceptionally great.. As pertinent to the comment above, that of protecting domestic producers from foreign competition at the [unseen] expense of higher-prices for consumers; the latter being what producers favor while lower prices and abundance being what consumers favor. Trump and the like wouldn’t want us to see that, now.

This is still what most non-economists, and even those mainstream ones, suffer from. For example, it’s easy to see that the person who has a job under a raising of the minimum wage—a price fixing scheme that doesn’t make anyone richer through such an arbitrary declaration—indeed has a higher nominal wage. But it’s much harder to see that the person unemployed by such a law is without a wage whatever, i.e., earns zero an hour. Seattle is revealing this empirically, though logic is all that’s needed to establish that the law will not and cannot work.

In other words, minimum wage laws don’t raise real wages; they raise nominal wages for those who keep their jobs. Its supporters point only to the “seen” effects. But Bastiat saw right through such schemes intended to benefit one group of people at the expense of the forgotten others.

Or, what about how people believe military spending boosts the economy? Besides the fact that they’re not producers of consumer goods, and exchange nothing for something (where all anyone sees is their act of spending money), it’s almost as if no one can see that if military spending was cut and met with a corresponding tax break, that it’s this which would be beneficial to the economy. The money would be put back in the hands of the people; and they would spend, save, or invest it according to their needs.

Bastiat also distinguished the social sciences, where men are conscious, acting beings with ends and goals they place a value on, from the physical sciences; and therefore, economics from the scientific method of the physical sciences, where the subject matter isn’t purposeful human actors.

The empiricists of today might point to a scenario where the law (for an arbitrarily chosen minimum wage) was raised and unemployment didn’t result; but this is only because of the ceteris paribus (all things equal) notion of economics, which is to say that, if all things are equal, which they are not, this is what the effect of said policy would be. In short, productivity, where wages come from, may have increased too. Or, for inflation, prices don’t necessarily rise equally; the demand for money may have increased too, negating the rise in supply. Other factors are always at play, but the logic applies nevertheless.

Economic laws are necessarily qualitative, i.e., “if-then” propositions, and not quantitative as many expect of economists (e.g. “predict exactly the amount which will result from X.”), and done under this notion of all things equal. Therefore, empiricism is an improper method for economics and doesn’t refute economic logic. If the economic law turns out unsound in practice then one needs to rework their logic, not conduct more experiments. It is impossible to make quantitative laws in economics, where subjective human actors are the subjects of study, i.e., their preferences change, the future is uncertain, etc.

Being inspired by the early French economist Jean-Baptiste Say, as Bastiat had been, surely helped him out a lot. Say, who was a sort of proto-praxeologist, knew economic truths could be derived through logical deduction that aren’t subject to “testing” or experimentation, unlike that of today where many a positivists have taken over the economic science and turned it into an empirical and approximate study. They have come to think that, as in the physical sciences, that men are like stones or atoms: easily manipulated in a social experiment.

Bastiat knew too that principles, or natural laws in human action, could be established. Economics was not a mere guessing-game subject to later validation, but a science of cause and effect. Others like to think there aren’t real laws in economics, that governments can usurp them, or that they’re really subject to experimentation first in order to find out. This is not so; they’re logical laws.

He correctly identified economics as the study, or science, of man acting with scarce means to attain subjectively valued ends, even using the phrase “human action” which was to become the title of Ludwig von Mises’ magnum opus. Bastiat bases his analysis off of the action-axiom of economics, and even recognizes that a prerequisite to action is a felt uneasiness, in which he states, “the satisfaction of wants and repugnance to suffering are the motives of human action.”

What we might call central planners today, Bastiat called “system makers.” These system-makers, i.e., those who want to change and mold man, had essentially only one means at their disposal in order to uproot the natural order around them, and this was force. Bastiat considered another option, universal consent, as possible too. But so long as there’s just one anarchist, as Murray Rothbard once pointed out, then there isn’t universal consent. Therefore, to achieve socialism rests upon force. Anyone wishing to upset the natural order—whereas man’s natural theory of property is a private ethic, which is particularly pronounced in the U.S.—must compel men to do things outside of normal, self-interested ways.

Egalitarianism is not only undesirable, but it’s unachievable; men are unique, subjective individuals. “Force, then, is what the organizers need who would subject humanity to their experiments,” he recognizes. And even then “they will find that they still lack the power to distribute mankind into groups and classes, and to annihilate the general laws of property, exchange, inheritance, and family.”

He knew, too, that these “system-makers” wished to turn mankind into one large social experiment, as they have successfully done today.

How ego-driven is it to believe man is malleable, and machinistic, to be shaped into a mold by his overlords? Here is where he was highly critical of Jean-Jacque Rousseau, the Francophone philosopher and author of Contract Social (the mythical idea of a “social contract”), who very much elevated the legislator-politician high above the rest of the people. Bastiat says of him that “it is impossible to give an idea of the immense height at which Rousseau places his legislator above other men.”

According to Bastiat, “He [Rousseau] believed them to be quite incapable of forming for themselves good institutions. The intervention of a founder, a legislator, a father of nations, was therefore indispensable.”Rousseau didn’t believe man could self-govern, but Bastiat believed man should be free to associate and contract with others how he sees fit. The idea of a “social contract” binding men together was and is a myth; an artificial social order.

In The Law he asks if there’s something special about these people versus the men that cannot be free:

“If the natural tendencies of mankind are so
bad that it is not safe to permit people to be
free, how is it that the tendencies of these
organizers are always good? Do not the
legislators and their appointed agents also
belong to the human race? Or do they believe
that they themselves are made of a finer clay
than the rest of mankind?”

He speaks in Economic Harmonies of this same problem:

“And if the tendencies of human nature are
essentially perverse, where are the organizers
of new social systems to place the fulcrum of
that lever by which they hope to effect their
changes? It must be somewhere beyond the
limits of the present domain of humanity. Do
they search for it in themselves — in their own
minds and hearts? They are not gods yet; they
are men, and tending, consequently, along with
the whole human race, toward the fatal abyss.
Shall they invoke the intervention of the state?
The state also is composed of men. They must
therefore prove that they form a distinct class,
for whom the general laws of society are not
intended, since it is their province to make
these laws. Unless this be proved, the difficulty
is not removed, it is not even diminished.”

This argument of man being so bad that he must be ruled reigns today among those who don’t realize that the people doing it must be—men, like they are. Men can’t be free, but should have power, they reason.

In Economic Harmonies he also says that, “society, such as they conceive it, will be directed by infallible men denuded of their motive of self-interest.” This skepticism of man and the suggestion that he needs rulers remains the predominant view of our times. “He who rejects liberty has no faith in human nature,” he says. Those who have no faith in men inevitably wish to control him. But as Ludwig von Mises said of this problem, they do so at pain of contradiction, because “If one rejects laissez faire on account of man’s fallibility and moral weakness, one must for the same reason also reject every kind of government action.”

As for the alleged differences in Democrats and Republicans today, which are closely associated on the political spectrum but assumed to have vastly different policy proposals, Bastiat said of system-makers that “The inventions are different — the inventors are alike.” Does anyone really care what a thief spends your money on, welfare or warfare?

Where others saw a chaotic natural order that needed to be changed, Bastiat saw beauty and harmony in market forces. Self-interested individuals were not antagonistic to one another, but all helped to indirectly satisfy each other’s ends through a division of labor and cooperation. And as well, their self-interestedness doesn’t disappear once they land a seat in the government, which is in the business not of producing for others, but of expropriating property for their own gain. He saw, too, that exchange, when free and uncoerced, is mutually beneficial to both parties. We don’t need to be alike to get along. The division of labor allows men of difference to form a socio-economic order.

Unlike Karl Marx, who was hostile to the division of labor, seeing it as “alienating” the workers from their products, Bastiat saw clearly that it is only through a division of labor in which we’re able to be infinitely more productive than would be possible in a state of self-sufficiency, where man made everything for himself. The division of labor allows man to exert a lot less than what he gains. “It is impossible not to be struck with the measureless disproportion between the enjoyments which this man derives from society and what he could obtain by his own unassisted exertions”, says Bastiat. I alone could never make a car, probably not even shoes, or a shirt, but yet I get to enjoy these things.

And the division of labor is mutually beneficial too:

“Every individual member of society has
absorbed millions of times more than he
could himself produce; yet there is no
mutual robbery.”

And through the use of money in this division of labor,

“...the carpenter has paid, in services, for
all the services others have rendered to him.”

Everything a man can consume in a free market is utility he provided to someone else first.

This is the beauty of the economic system: people specialize in what they do best, and instead of direct barter or producing everything for ourselves, we indirectly exchange with money to get the goods and services we need. Otherwise, someone like an economist would have to hope to sell his services to a grocer for food in order to eat. That would be a hard find. Rather, he sells it for money; and he uses the money to fulfill his desires. There is no way to easily solve this double-coincidence of wants without money.

In another point, Bastiat sees that the capitalist is also a consumer too; and that he can’t help but be one. Thus, since his demand curve is downward sloping too, i.e., the higher the price of something (mandatory wages, say) the less he’ll purchase, the demand for labor will decrease too; and unemployment will result. Again, the empiricists might point to a case where X happened but Y didn’t follow, but they’re once again ignoring the qualitative, all things equal nature of economic laws.

Bastiat knew well the ingredients to economic prosperity and liberty: Private property rights, the division of labor, capital accumulation, and the freedom of exchange. When voluntary exchange is permitted, if rulers step out of the way, this is the means of achieving maximum benefit to all peoples integrated into the economic system. Such truths hold today, and will forever.

Economics being value-free though, doesn’t state that the ends chosen by actors are good or bad, but just points out the formal fact that man acts. What is deduced from here makes up the whole of economics—diminishing marginal utility, the law of supply and demand, etc—that we ignore at our own peril. The State cannot suspend economic laws with legislation as is often imagined.

And here, Bastiat distinguished law from legislation too. Today, the former has been entirely conflated with the concept of law, which is meant to protect rights. There is no law in the public’s mind anymore but the ones governments scribble on paper and demand you to follow. They have become inextricable: to have law, you must have a State; and without a State there is no law.

He says,

“There is a wide difference between a social
organization founded on the general laws of
human nature, and an artificial organization,
invented, imagined — that takes no account
of these laws, or repudiates and despises them
— such an organization, in short, as many
modern schools would impose upon us.”

Political science was, to Bastiat, the discovery of these natural laws. In short, here, a planned order is inferior to a spontaneous order. Society must be built upon a natural order—on a natural law—or else it is an unsustainable one.

Bastiat appears to me truly ahead of his time, asserting moral and economic truths that are universal and eternal, and doing so with utmost confidence. He was a serious, if underrated, political economist of his time. To paraphrase what a friend once said, “You never even really need to read Mises and Rothbard unless you want detailed economics, because Bastiat has it all.” He was right. Reviewing the first chapter of Economic Harmonies shows that others who are known as Austrian school economists today must have drawn directly from Bastiat. His insights, at times, are like reading anything contemporary Austrians would write.

Indeed, Henry Hazlitt was borrowing directly from Bastiat in his famous Economics in One Lesson, a classic exposition in economics that’s widely popular, influential, and still much needed today. Hazlitt, too, had a way of pointing out the absurdities in the schemes to rig the economy through government intervention. The whole premise of Hazlitt’s book, starting with “the broken window fallacy”, is that the good economist, as Bastiat knew, must look further into the consequences of such policies to reveal not just which is seen, but that which is unseen.

The most basic example he used, building off Bastiat, is the idea, which many fail to grasp, that breaking windows can supposedly stimulate an economy since it will make work for the glass maker. But now, whereas he already had a window, he must put money towards something other than, say, investing further in his business. He had to replace, unnecessarily, what he already had.

Why don’t they see this? The way Hazlitt put it,

“They had forgotten the potential third party
involved, the tailor. They forgot him precisely
because he will not now enter the scene. They
will see the new window in the next day or two.
They will never see the extra suit, precisely
because it will never be made. They see only
what is immediately visible to the eye.”
(Economics in One Lesson)

Bastiat, like Hazlitt, was willing to take arguments to their reductio ad absurdum extreme to point out their problems. Obviously, if employees walked into work demanding a 100% pay raise tomorrow they would be promptly unemployed. But no less would this effect be apparent, though to a lesser degree, if it was raised 10%; someone would still be hurt by this policy, though many might refer to this as a needed “bump.” (So long as the minimum wage is below the free-market price for labor, as it often is, it has little effect).

Henry Hazlitt used the same arguments. If trains take jobs, why not have men lug coal sacks on their back? Is there some odd preference for work by the sweat of the brow? Those in public office are obsessed with “job creation” programs, missing that the purpose of employment and production is consumption. The jobs are not an end in themselves, but a means to that end. Of course, banning trains could create a lot of jobs, as could banning shovels. But what would they produce? The end goal is consumption; production is simply the means to reach this goal. Getting lost in the idea that “we need more jobs” misses that what we need more of is more wealth!

This bias is prevalent today among the business elite too—like Elon Musk, Mark Zuckerberg, and Bill Gates—all which fear the robots “taking our jobs” and suggest a Universal Basic Income for the solution. Not so obviously, I guess, the UBI will only discourage production as it incentivizes people to not produce (and produced goods is the only way for there to be new purchasing power in the economy); it subsidizes those who seek non-work income of the welfare versus that of working. Unfortunately, these people are listened to. Like your Warren Buffets who have sway over the minds of others due to investment or businesses success, they will not buck the system they benefit from (among other things, Buffet benefits from the Fed’s deliberate inflation of assets prices; he owns assets).

While taxation affects relative production, meaning growth can still be had despite taxation, though relatively lessened, we can take this to its logical extreme to see that one-hundred percent taxation would immediately revert mankind to a subsistence standard of living.

Bastiat used it, and still today comedy can be an effective means of communication; but it could go either way. While the “taxation is theft” meme among the libertarian crowd went viral outside of it, there’s also the opposite side of the equation: that pop-culture is turning people onto bad ideas. The future depends on good ideas winning out, and with a resurgence in the attractiveness of socialism, the battle of ideas is far from over.

The socialists want to place everyone neatly into groups, but Bastiat though, as do I, thought “class” is just an arbitrary idea. There is no such entity “the working class” which socialists pretend to represent. He thus supported methodological individualism which is a huge part of what has come to be known as the Austrian school of economics: that groups do not act, but are made up of individuals. These collectivist metaphors are draped over bad economic policies to justify interventionism, such as in the name of “saving the nation”, or the “common good.”

Unlike how Marxism is pitched today in pop-culture, as cool and hip, Bastiat is actually fun. You won’t be let down. His logic is razor sharp; and his clarity and choice of words intriguing. While most economic writing, especially that of textbooks, might be considered dry and lifeless, Bastiat has the capability to bring the issues to life and help you understand them.

His words are not only a magnificent work in political economy; they’re a splendid work of literature in themselves. You’ll learn a lot more from him than the mainstream econometricians of today, who have turned economics into technical, incomprehensible, mathematical jargon that means little to nothing to the layman; and which has little to do with economics. Economics can be explained verbally, and here is where Bastiat shined at conveying these truths to his readers.

As Albright confided to me, “I learned more on economics from Bastiat than I did in all of undergrad college. That's both awesome and sad!” How true: economics has been reduced to nothing, tucked away in business departments and treated as irrelevant today when it’s so essential it be resurrected. Bastiat is one of the antidotes to this problem. Pick him up; start with The Law; don’t forget his other works, too.