Bastiat on What Is Seen and What Is Not Seen

It is the title of this essay that made F. A. Hayek praise Bastiat's "genius" in making sound economic ideas public. It has been a good read so far. I highly recommend Bastiat to anyone interested in the major political issues of our time, for two reasons. One, he wrote quite a while ago--over a century and a half--and yet the same fallacies he found himself trying to refute are alive and well today. Two, Bastiat is much easier to read than, say, F. A. Hayek or Adam Smith.

The main point of Bastiat's essay is this:

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous, for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.

Fundamentally, according to Bastiat, although these are my words, good economics is a matter of having the right moral outlook. Often proponents of free markets are accused of one of two things. First, we are sometimes accused of not caring at all about the moral constitution of a society. This is utterly false, and in fact all of the classical arguments in favor of free markets are based on a firm commitment to justice. Indeed, it is really those who oppose free markets who also oppose the kind of logic which justice truly demands, for they insist that the ends can justify the means, that the short run must sometimes take precedence over the long run, and that only visible results are of any consequence.

Second, we are sometimes accused of caring only about the long run and never about "what happens in the meantime." Thus it is thought that we wouldn't care if thousands of people suffered in utter poverty for several years, so long as in the long run we reached the most desirable result. But this complaint is made without taking into account both what is seen and what is not seen. Our desire may be to give everyone enough to live on and not be in poverty; but even though we see the good effects of our well-intentioned programs, we may fail to see all the long term damage we are doing.
For instance, passages like the following express beautifully the fundamental error in "public works" programs (emphasis added):

Let us get to the bottom of things. Money creates an illusion for us. To ask for cooperation, in the form of money, from all the citizens in a common enterprise is, in reality, to ask of them actual physical cooperation, for each one of them procures for himself by his labor the amount he is taxed. Now, if we were to gather together all the citizens and exact their services from them in order to have a piece of work performed that is useful to all, this would be understandable; their recompense would consist in the results of the work itself. But if, after being brought together, they were forced to build roads on which no one would travel, or palaces that no one would live in, all under the pretext of providing work for them, it would seem absurd, and they would certainly be justified in objecting: We will have none of that kind of work. We would rather work for ourselves.

Note that Bastiat does not exclude the possibility that a community might actually agree to work together on something. He simply excludes the idea of taxes paying for public works. Why? Because it is all too easy to take money from people without acknowledging that what you are actually taking from them is their labor--that is, in a sense, their very lives.

It must always be remembered that the free market system is not a zero sum game. If you and I exchange something, that means I must have wanted what you had more than what I had, and you must have wanted what I had more than what you had. Otherwise, one of us is a fool. Thus an exchange means a net positive for both of us. So it is with all voluntary exchanges. That is not to say one never regrets certain purchases or ventures; I do not suggest that life can ever be without risks. But on the whole, it is possible for you to gain, while simultaneously everyone else gains from you as well.

However, it must be equally remembered that forced cooperation is a zero sum game, or perhaps even negative. If the government takes money from me and gives it to someone else, nothing has been gained or lost; the same money is there that was there before. Perhaps it will be used by the other person in a wiser way than I would have. How the government could ever know this, I cannot say. More likely it would turn out just the opposite; people who get something for free tend to be more irresponsible with it. Therefore, rather than an exchange which results in a net positive, government redistribution--whether in the form of handouts or programs or all sorts of other expenditures--results in a wash, a zero, or perhaps even less than a zero. For every dollar the government spends, what remains unseen is what else that dollar might have been spent on by the person from whom the government stole.

Anyway, read the whole essay. It's quite good. Here's an excerpt that might be pertinent for today's discussions about military spending:

A nation is in the same case as a man. When a man wishes to give himself a satisfaction, he has to see whether it is worth what it costs. For a nation, security is the greatest of blessings. If, to acquire it, a hundred thousand men must be mobilized, and a hundred million francs spent, I have nothing to say. It is an enjoyment bought at the price of a sacrifice. Let there be no misunderstanding, then, about the point I wish to make in what I have to say on this subject. A legislator proposes to discharge a hundred thousand men, which will relieve the taxpayers of a hundred million francs in taxes. Suppose we confine ourselves to replying to him: "These one hundred thousand men and these one hundred million francs are indispensable to our national security. It is a sacrifice; but without this sacrifice France would be torn by internal factions or invaded from without." I have no objection here to this argument, which may be true or false as the case may be, but which theoretically does not constitute any economic heresy. The heresy begins when the sacrifice itself is represented as an advantage, because it brings profit to someone.

Bastiat on democracy

Frederic Bastiat makes fun of the contradiction between the socialists' view of voting rights and their view of individual liberties:

When it is time to vote, apparently the voter is not to be asked for any guarantee of his wisdom. His will and capacity to choose wisely are taken for granted. Can the people be mistaken? Are we not living in an age of enlightenment? What! are the people always to be kept on leashes? Have they not won their rights by great effort and sacrifice? Have they not given ample proof of their intelligence and wisdom? Are they not adults? Are they not capable of judging for themselves? Do they not know what is best for themselves? Is there a class or a man who would be so bold as to set himself above the people, and judge and act for them? No, no, the people are and should be free. They desire to manage their own affairs, and they should do so. But when the legislator is finally elected--ah! then indeed does the tone of his speech undergo a radical change. The people are returned to passiveness, inertness, and unconsciousness; the legislator enters into omnipotence. Now it is for him to initiate, to direct, to propel, and to organize. Mankind has only to submit; the hour of despotism has struck. We now observe this fatal idea: The people who, during the election, where so wise, so moral, and so perfect, now have no tendencies whatever; or if they have any, they are tendencies that lead downward into degradation.

And I can't resist reproducing this passage:

The claims of these organizers of humanity raise another question which I have often asked them and which, so far as I know, they have never answered: 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? The organizers maintain that society, when left undirected, rushes headlong to its inevitable destruction because the instincts of the people are so perverse. The legislators claim to stop this suicidal course and to give it a saner direction. Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority.

I daresay this essay is still one of the best defenses of a free society in existence. Bastiat shows us how a true egalitarian is also a libertarian.

Frederic Bastiat on socialist anthropology

Here is an absolute must read: Frederic Bastiat's tract entitled, "The Law." Frederic Bastiat was a French economist who lived in the first half of the nineteenth century, who was bold enough to challenge the followers of the great Rousseau ("who consider themselves far advanced, but whom I consider twenty centuries behind the times," writes Bastiat). He challenged the fundamental assumptions of socialism, and wrote an essay repudiating all forms of government intervention, including "protective tariffs, subsidies, guaranteed profits, guaranteed jobs, relief and welfare schemes, public education, progressive taxation, free credit, and public works," all of which he says "are always based on legal plunder, organized injustice." According to Bastiat, the main purpose of the Law was to banish all plunder from a society, which he defined as that "fatal desire" in mankind "to live and prosper at the expense of others." Instead, he points out, the Law ends up being used for the opposite purpose: either that the few should profit at the expense of the many, or that they many should profit at the expense of the few; or that everyone should profit at the expense of everyone else.

At the heart of his argument is a fundamental objection to the intellectual assumptions of his day concerning the nature of human beings. Consider, first of all, this critique:

"Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all.

"We disapprove of state education. Then the socialists say that we are opposed to any education. We object to a state religion. Then the socialists say that we want no religion at all. [Ironic from today's perspective, isn't it?] We object to a state-enforced equality. Then they say that we are against equality. And so on, and so on. It is as if the socialists were to accuse us of not wanting persons to eat because we do not want the state to raise grain."

This confusion between state and society is connected to a view of the human being as "inert," so the the relationship between the intellectual and society is like that "between a potter and clay":

"Present-day writers--especially those of the socialist school of thought--base their various theories upon one common hypothesis: They divide mankind into two parts. People in general--with the exception of the writer himself--from the first group. The writer, all alone, forms the second and most important group. Surely this is the weirdest and most conceited notion that ever entered a human brain!

"In fact, these writers on public affairs begin by supposing that people have within themselves no means of discernment; no motivation to action. The writers assume that people are inert matter, passive particles, motionless atoms, at best a kind of vegetation indifferent to its own manner of existence. They assume that people are susceptible to being shaped--by the will and hand of another person--into an infinite variety of forms, more or less symmetrical, artistic, and perfected."

Bastiat's view was quite different. In his view, human productivity and cooperation were tendencies given to us through Providence, and were not the product of the state. Order was achieved through spontaneous forces, which no government had the power to create or control.

This essay by Bastiat seems as timely as ever. I do not think the intellectual climate in the West has ever moved toward full acceptance of the idea that society and the state are fundamentally distinct categories. Our political discourse is dominated by the assumption that government "manages" society, and it is taken for granted that we must compete with one another for representation in government if we want our slice of the pie. I challenge everyone to rethink these assumptions, and stop pretending that our modern problems are so very different from the problems faced in centuries past!