Friday, February 17, 2012

French Free-Market Economic Wisdom

No, that is is neither a typo, nor sarcasm.

From the great Frédéric Bastiat:
When James B. gives a hundred pence to a Government officer, for a really useful service, it is exactly the same as when he gives a hundred sous to a shoemaker for a pair of shoes.
But when James B. gives a hundred sous to a Government officer, and receives nothing for them unless it be annoyances, he might as well give them to a thief. It is nonsense to say that the Government officer will spend these hundred sous to the great profit of national labour; the thief would do the same; and so would James B., if he had not been stopped on the road by the extra-legal parasite, nor by the lawful sponger.
Let us accustom ourselves, then, to avoid judging of things by what is seen only, but to judge of them by that which is not seen.
Words to live by.

This is taken  from one of his most famous essays, about the broken windows fallacy - that you cannot spur economic activity by destroying assets and claiming that the increased production to replace them is an economic benefit, because this ignores the cost of the forgone spending on other items.

Everyone knows that, right? Nobody is seriously advocating destroying productive assets to boost the economy?

Ha ha ha! Oh, how little you understand Washington!

Bastiat himself was quite familiar with the difficulties of getting politicians to not justify wasteful spending because of it's stimulating effects:
Dear me! how much trouble there is in proving that two and two make four; and if you succeed in proving it, it is said, "the thing is so plain it is quite tiresome," and they vote as if you had proved nothing at all. 
Bastiat discusses at length the implicit arguments of those who demand government protection for their industry:
Ought not the protectionist to blush at the part he would make society play?
He says to it, "You must give me work, and, more than that, lucrative work. I have foolishly fixed upon a trade by which I lose ten per cent. If you impose a tax of twenty francs upon my countrymen, and give it to me, I shall be a gainer instead of a loser. Now, profit is my right; you owe it me." 
They're still saying exactly that.

Bastiat also makes the oft-neglected point that to oppose the government subisidising an activity is entirely different to the question of whether you desire that activity in general. His essay makes the point that subsidy policies are only ever about transferring wealth, not creating wealth. The policy must live or die on the merits of the thing to be susidised, and not the claim that the employment of the labor itself is productive:
But, by a deduction as false as it is unjust, do you know what economists are accused of? It is, that when we disapprove of Government support, we are supposed to disapprove of the thing itself whose support is discussed; and to be the enemies of every kind of activity, because we desire to see those activities, on the one hand free, and on the other seeking their own reward in themselves. Thus, if we think that the State should not interfere by taxation in religious affairs, we are atheists. If we think the State ought not to interfere by taxation in education, we are hostile to knowledge. If we say that the State ought not by taxation to give a fictitious value to land, or to any particular branch of industry, we are enemies to property and labour. If we think that the State ought not to support artists, we are barbarians who look upon the arts as useless.
The essay is most famous for the broken windows analogy. But in fact the whole essay is brilliant throughout. As they say, read the whole thing.

Frédéric Bastiat, in other words, pioneered the concept of opportunity cost (although he didn't coin that term). This is such a basic tool of economic thinking these days that we tend to forget that it wasn't always there. It came about largely because of Frédéric Bastiat. And it's still one of the most powerful arguments against hare-brained government programs - where did the money to fund this come from, and what else could have been done with that money instead?
Here is the moral: To take by violence is not to produce, but to destroy. Truly, if taking by violence was producing, this country of ours would be a little richer than she is. 
As true now as it was in 1850.

Trenchant advocate of economic liberty and opponent of sloppy thinking, M. Bastiat is richly deserving of the posthumous induction into the Shylock Holmes Order of Guys Who Kick Some Serious Ass.


  1. I was expecting a cite to this Business Week article about how regulations "create jobs", as if the effort required to comply with regulations was a benefit.

  2. Yeah, that article was a classic in the genre that Bastiat had to deal with. I guess bad arguments never die, they just get recycled in slightly new versions.

    It reminds me of the classic Thomas Sowell response to the claim that it was economically beneficial to do something in a more labour-intensive manner - if it were better to get ten men to dig a ditch with shovels instead of have one man dig it with an excavator, then why not get a hundred men to dig the ditch with teaspoons? Surely that would be even better still!