Will The Real Bastiat Please Stand Up?

     

Robert Leroux's essay prompted a number of thoughts that I would like to see addressed in the course of this discussion. They include the following:

I would like to begin with a few comments addressing Robert's remarks about Bastiat's originality as a social theorist (Q3).

The easy mistake for modern readers is to see Bastiat the original "theorist" already fully formed between 1846 and early 1848 (the period when he was writing the brilliant economic sophisms)[25] and not to see him then as a "theorist in waiting" as it were, waiting for the time and opportunity to gather all his original insights and put them in a more coherent and fully thought out form. I think Bastiat began as an economic journalist in working as an activist for the free-trade movement. In the process he discovered he had both a facility for writing and some profound insights into how the free market operates that others either had not thought of or had not developed fully. But it took a few years before he felt able to make the transition from journalist to theorist, and then he ran out of time when his illness ended his life. During 1848 through 1850 he was feverishly trying to complete his treatise on political economy in spite of three significant distractions, which ultimately prevented him from achieving his goal. I will comment on these distractions to his theoretical work in a future post.

In spite of these distractions, throughout 1848-1850 Bastiat continued to write scholarly articles for the Journal des économistes, to attend discussions organized by the Political Economy Society, and to work on chapters of his magnum opus on economic theory, Economic Harmonies. [26] Not surprisingly, he was not able to complete more than half the volume, which he had been working on intermittently since July 1847 when he began lecturing on political economy at the School of Law in Paris. The working title of the book then was "The Harmony of Social Laws," and this eventually became Economic Harmonies, the first 10 chapters of which were published in January 1850. His friend and literary executor Prosper Paillottet gathered and edited what he could from unfinished drafts and sketches and published a more complete edition in 1851. From this and his articles published in the Journal des économistes, and from summaries of the debates at the Political Economy Society, we can piece together what is most original in Bastiat's economic thought and in what directions he might have gone if he had lived a few years longer[27] Robert has provided us with a list of several of these original insights, but I would add a couple more to that list. Here is my summary of Bastiat's theoretical innovations in the disciplines of economic, political, and sociological theory with fuller comments following:

(1) His methodological individualism. Rather than starting from "exchange" or "production," which was the wont of most classical economists of the day, Bastiat began his analysis with the acting, choosing individual who has limited time and resources and competing preferences that need to be satisfied in their order of priority. This is why modern-day Austrian economists find his writing so congenial: He seems to found his economic theory on a kind of "pure theory of choice." This approach comes out most clearly in his many references to Robinson Crusoe and how he goes about organizing his life on the Island of Despair.[28] Economic decisions about what to do, when, and how take up a lot of his time before the opportunities for trade (with Friday) come into the picture. Richard Whately dismissed this kind of economics entirely (in a very Schumpeterian manner) on the sole grounds that no exchange was involved, thus there was no "economics" to talk about. [29] I believe this is one of the great innovations of Bastiat, namely, the invention of "Crusoe economics" as a thought experiment in order to better understand how individuals go about making economic decisions even before formal exchange takes place. No one before Bastiat did this in any systematic way. Of course it is a commonplace practice today, which no economist lecturing to first year students could do without.

(2) Rethinking the classical theory of rent. This was the topic that most upset the other political economists in the meetings of the Political Economy Society, and Bastiat was very hurt and frustrated that they did not understand or appreciate what he was trying to do.[30] They completely rejected Bastiat's reformulation of the classical Ricardian theory. In his debates with socialists like Proudhon over the morality of profit and interest, Bastiat had come to the realization that the distinctions between profit, interest, and rent had broken down theoretically and should be abandoned. This was especially true for rent, which many mainstream economists still thought was somehow unique and different from other sources of income. This was because they still retained the 18th-century notion that there was something "free" (a gift from nature and thus not man-made) in any income that came from the soil, sunshine, and rain. What Bastiat tried to do was to create a more general theory of profit-making, which he summarized somewhat crudely as "the exchange of service for service." Thus a manufacturer provides a consumer with a "service" when he sells him a piece a cloth for a sum of money (profit); the banker provides a consumer with a "service" when he lends him a lump sum of money now in return for payments over a period of time (interest); and a landowner provides a farmer with a "service" when he lets him use a piece of land to grow crops in exchange for an annual payment (rent). Bastiat very originally thought that they were all variations on the same theme and that there was nothing unique or peculiar about rent. The other political economists rejected this fundamental challenge to the orthodox way of thinking about rent. Bastiat's only ally in these debates was Roger de Fontenay (1809-91), who assisted Paillottet in editing Bastiat's works after his death and who also wrote a book on rent using Bastiat's new theory. [31]

(3) The rejection of Malthusian limits to population growth. The second orthodoxy of the classical school that Bastiat challenged was the idea that mankind was trapped in an inevitable crunch between limited increases in the production of food and unlimited increases in the size of human populations, which would lead to periodic famines and other disasters. Some of Bastiat's closest friends, like Joseph Garnier and Gustave de Molinari, were staunch Malthusians, which made Bastiat's challenge quite difficult personally. Bastiat rejected the Malthusian orthodoxy on a number of grounds: [32] Firstly, he had a notion of "human capital" (although he did not use this term) that regarded more people as a boon to the economy not a hindrance, as they would produce and create things and then trade these things with others, thus increasing everybody's standard of living; secondly, he believed that the economists had underestimated the productive capacity that the industrial revolution, the division of labor, and free trade would unleash; and thirdly, that as rational, thinking, and planning individuals, people could and would use "moral restraint" to limit or postpone the size of their families. On all three grounds history has proven Bastiat correct and the Malthusians wrong.

(4) The quantification of the impact of economic events. This may seem a strange thing to include in a list of Bastiat's theoretical innovations, as he seems to be much more of a "moral economist" or "philosophical economist" than a "mathematical economist." But I think a case can be made for the latter, or at least one in embryo. He began to speculate on what the costs of economic intervention by the state (or outright destruction of assets in the case of the famous broken window) might be to consumers in May 1847, when he took an idea from the Anti-Corn Law writer Thomas Perronet Thompson, which he called "the double incidence of loss," and began to apply it to more complex situations. [33] In his earliest formulation (ES3 6 "One Profit versus Two Losses" [May 9, 1847] and ES3 7 "Two Losses versus One Profit" [May 30, 1847]), Bastiat thought there were only three parties whose gains and losses needed to be considered: the person whose window is broken ("the seen"), the glazier who gets work replacing the broken window (another example of "the seen"), and the boot maker who does not make a sale to the owner of the broken window ("the unseen"). Moreover, he thought the losses or gains were equal for each party. Upon further reflection Bastiat came to the realization that this approach was inadequate because many more parties were involved to one degree or another (perhaps millions) and that the gains and losses were different and variable. His new version of the theory was called "the sophism of the ricochet" [34] in which he described a "ricochet or flow on effect" that rippled outwards from an economic action and affected a huge number of individuals as its disturbances diminished according to distance from the original action. [35] Bastiat realized he did not have the mathematics to calculate what these ricochet effects might be (he needed some calculus) so he wrote to a prominent liberal astronomer and mathematician François Arago appealing for help. [36] We have no record if any answer to Bastiat's queries was given. Nevertheless Bastiat continued to work on his theory of the ricochet effect, which he took in new and interesting ways. For example, he recognized that not all ricochet effects were harmful or negative (like tariffs or government subsidies to industry), but could also be positive. Examples of the latter included the invention of printing and steam locomotion, which dramatically lowered the cost of the dissemination of ideas, or the cost of transportation, and these savings flowed through the economy providing benefits that were systemic. It is interesting to speculate what Bastiat might have done with this idea if he had had the right mathematics and enough life left in him to do something with it. Perhaps here we can see Bastiat the "mathematical economist" in the making.

(5) The idea of "spontaneous," or "harmonious," order. Since Robert has already mentioned this aspect of Bastiat's originality, I will only note it and pass on to other matters. I will only add that this is yet another idea in Bastiat's thinking that modern Austrians (Hayekians in this case) find very congenial, seeing him as a precursor to or even a proto-Austrian theorist.

(6) The interconnectedness of all economic activity. This idea is very much related to Bastiat's idea of "the ricochet effect," as he came to the realization that millions of economic actors were affected by changes that were taking place around them, either negatively in the case of government intervention or positively in the case of technological innovations. A study of the language Bastiat uses in his writings on this topic shows how he thought of the interconnectedness of all economic activity as something like electricity that courses through wires, or water that flows through channels, or pebbles that bounce across a flat body of water causing ripples. What is intriguing here is how close Bastiat was to seeing these economic activities as carriers of information (in a Hayekian sense) about the consequences of economic activity to millions of participants. Economic losses and gains spread out from a single action, requiring individuals to adjust their behavior accordingly.

(7) His theory of the "economic sociology" of the state. If the second half of the Economic Harmonies was the first book Bastiat never finished, then his History of Plunder was his second. Paillottet tells us in a footnote at the end of the first half of Economic Harmonies, in the fuller version he published in 1851 after Bastiat's death, and in other footnotes in the Oeuvres complètes what Bastiat's intentions were for such a book. Bastiat had a clear theory of plunder, exploitation, and class analysis that he had developed in the opening two chapters of Economic Sophisms Series II (January 1848), several essays written in 1848 ("Property and Law" [May 1848] and "Property and Plunder" [July 1848]), and the sketch in the unfinished Economic Harmonies [see for example </title/79/35538/669090>]. He believed there was a dichotomy between two antagonistic classes that had been at war for centuries, namely "les classes spoliées" (the plundered classes) and 'la classe spoliatrice" (the plundering class). [37] This class struggle (and I deliberately use this expression taken from the Marxists) had gone through various stages, which Bastiat wanted to explore in his History of Plunder, beginning with war and moving on to slavery, theocracy, monopoly, government exploitation, and communism. The most detailed account he gave in his scattered writings was in "The Physiology of Plunder" in ES2, where he explored in some depth the idea of "Theological Plunder" as a kind of case study of how he was going to apply his method to the study of European history. [38] It is interesting to note that Bastiat did have a place for Malthusian limits to growth in his sociology of the growth of State power. [39] According to Bastiat's theory, a state would continue to expand in size until it reached a limit imposed on it by the capacity of the taxpaying people to continue to fund the state at this level. Then a reaction would set in: The state's plundering would be resisted and a lower level of exploitation would be established, at which time the state would begin growing again until another "Malthusian crisis" point was reached. This cycle, he thought, was one that had been driving European history for centuries. [40] Thus, this interest in the sociology of the state suggests that Bastiat is also a "sociological economist" who has a theory of class analysis and class conflict that is far superior to that developed by Karl Marx.

(8) His Public Choice-like theory of politics. I will not say much about this aspect of his thought, except to say that it is perhaps the least developed of Bastiat's original contributions. It seems to me that many of Bastiat's insights into how the state operates and how vested interests use the state to gain privileges and subsidies is very Public Choice-like. One could do what some modern Austrian economists have done and trawl through Bastiat's writings to find his scattered insights into how political organizations work, which Public Choice theorists would find congenial. Perhaps in addition to being a proto-Austrian, Bastiat is also a proto-Public Choice theorist? However, I would prefer leaving the making of a final assessment of the real nature of his contribution in this area to an expert.

Thus to summarize, concerning his theoretical achievements one might say that there are "multiple Bastiats" who deserve our scholarly attention: There is the "Austrian Bastiat" (or at least a "Hayekian Bastiat"), the "mathematical Bastiat," the "sociological Bastiat," and the "Public Choice Bastiat." One might also say the same about "Bastiat the man," as we can identify several aspects of his personal life that are noteworthy and deserving of the attention of the historian. There is "Bastiat the agitator for free trade," "Bastiat the journalist," "Bastiat the revolutionary," "Bastiat the politician," and "Bastiat the sufferer of a terminal illness." But these are matters best left to future posts. In the meantime, perhaps we could ask if the "real Bastiat" would please stand up?

[25] The first collection of the Economic Sophisms was published in January 1846 and a second collection appeared in January 1848. Both volumes were immediately translated into English and other European languages. There was enough material for a third series but this never appeared in Bastiat's lifetime. Paillottet included them in his edition of the Oeuvres complètes but they were not well organized. Liberty Fund is translating them for the first time in volume 3 of its Collected Works. In this esay the following abbreviations are used: ES1 refers to the first series of Economic Sophisms which appeared in 1846; ES2 refers to the second series of Economic Sophisms which were published in early 1848; ES3 refers to the never translated third collection of Sophisms which will appear in Liberty Fund's translation of his Collected Works, vol. 3 (forthcoming) and which were published in the Oeuvres completes (1854) but scattered throughout the volumes.

[26] Frédéric Bastiat, Economic Harmonies, trans by W. Hayden Boyers, ed. George B. de Huszar, introduction by Dean Russell (Irvington-on-Hudson: Foundation for Economic Education, 1996). </title/79>.

[27] A list of his essays, articles and summaries of his contributions to debates in the Political Economy Society which were published in the Journal des économistes can be found in the Bibliography.

[28] References to Robinson Crusoe can be found in ES3 14, "Making a Mountain out of a Mole Hill" (c. 1847), and ES2 14. "Something Else" (March 21, 1847). In addition, there is a discussion of how a negotiation might have taken place between Crusoe and Friday over exchanging game and fish in "Property and Plunder," (July 1848), Collected Works vol. 2, p. 155; and there are 16 references to "Robinson" in the Economic Harmonies, especially in chapter 4, "Exchange." See for example </title/2393/225931>.

[29] Richard Whately, Introductory Lectures on Political Economy, Lecture I. "A man, for instance, in a desert island, like Alex. Selkirke, or the personage his adventures are supposed to have suggested, Robinson Crusoe, is in a situation of which Political-Economy takes no cognizance." </title/1377/35830/1403616>.

[30] See Bastiat, "209. Letter to Le Journal des économistes [undated]," Collected Works vol. 1 </title/2393/225997>. Also See Economic Harmonies, Chapter 13: Rent </title/79/35545> and the French editor's comments.

[31] Roger de Fontenay, Du revenu foncier (Guillaumin, 1854).

[32] See Bastiat, "De la population," Journal des économistes, October 1846, T. XV, pp. 217-34; and the incomplete chapter 16, "On Population," in Economic Harmonies </title/79/35552> and the accompanying French editor's note </title/79/35552/670395>.

[33] See Perronet Thompson, A Running Commentary on Anti-Commercial Fallacies (1836), pp. 188-89.

[34] In January 1848 Bastiat expressed some regret in a public lecture he gave for the Free Trade Association at the Salle Montesquieu in Paris that he had never got around to writing a sophism explicitly about what he called le sophisme des ricochets (the sophism of the ricochet effect). This was a topic that increasingly preoccupied him between the beginning of 1848 and his death at the end of 1850. Bastiat's speech can be found in Oeuvres complètes, vol. 2, "48. Septième Discours, à Paris, Salle Montesquieu, 7 Janvier 1848."

[35] Bastiat's use of the term "ricochet" would make an interesting study. An analysis of this was not possible until we had access to his collected works in electronic format. A key word search of his works in French shows a total of 25 occurrences of the word, which can be broken down in the following way: [The following volume numbers refer to Liberty Fund's edition of his Collected Works]: There are none in vol. 1 (Correspondence); two in vol. 2 (Political Writings); eight in vol. 3 (Economic Sophisms) most of which (seven) were in Series 3, which have never been translated into English before (five of the references can be found in one essay in ES3 18, "Monita Secreta" [February 1848]); two in vol. 4 (Miscellaneous Economic Writings); five in vol. 5 Economic Harmonies, all of which occur in the second half of the book, which were published posthumously by Paillottet; and eight in vol. 6 (writings on Free Trade). In the older Foundation for Economic Education translations only one of these occurrences was picked up, in Economic Harmonies: "Thus, wine in France was once the object of a multitude of taxes and controls. Then a system was contrived for restricting its sale outside the country. This case illustrates how the evils that arise tend to ricochet from producer to consumer." Chapter 11, "Producer and Consumer"; online: </title/79/35541/669197>. In the other four cases synonyms like "indirect" were used instead. I think the importance of this concept to Bastiat has been overlooked by scholars because of the inconsistent way the word has been translated into English. They have seen it as a colorful even poetic term rather than the technical economic term Bastiat considered it to be.

[36] Bastiat's appeal to Arago can be found in ES3 7, "Two Losses versus One Profit" (May 30, 1847), Collected Works, vol. 3 (forthcoming).

[37] The stark dichotomy Bastiat establishes between these classes is very clear in the original French but less so in the older FEE translation. An important paragraph (seventh from the end of the chapter) shows this quite clearly. It also shows how Bastiat's use of the technical expression par ricochet gets overlooked. Bastiat is describing the commonly held "specious" argument in defense of legal plunder by the state, namely, that it enriches everybody either directly or indirectly. The French original states "La spoliation est avantageuse à tout le monde: à la classe spoliatrice qu'elle enrichit directement, aux classes spoliées qu'elle enrichit par ricochet." (Emphasis added.) The FEE translation states, "Plunder is good for everybody. The plundering class is benefited directly; the other classes, by the indirect effect of increased spending." [A more accurate translation would be: "Plunder is good for everybody. The plundering class is benefited directly; the plundered classes, by the ricochet effect."]. Note how "les classes spoliées" has become "the other classes" and how "elle enrichit par ricochet" has become "the indirect effect of increased spending." See Economic Harmonies, chapter 17, "Private and Public Services" </title/79/35554/669744>.

[38] On "plunder by theocratic fraud" see ES2 1, "The Physiology of Plunder" (FEE edition) </title/276/23376/1573922>. Also Frédéric Bastiat, The Collected Works of Frédéric Bastiat. Vol. 2: The Law, The State, and Other Political Writings, 1843-1850. Chapter 4: Property and Law. Chapter 10: Property and Plunder.

[39] See ES2 1, "The Physiology of Plunder": "Plunderers conform to the Malthusian law: they multiply with the means of existence; and the means of existence of knaves is the credulity of their dupes." (FEE edition) </title/276/23376/1573939>, and "The state too is subject to the Malthusian law. It tends to expand in proportion to its means of existence and to live beyond its means, and these are, in the last analysis, nothing but the substance of the people." (FEE edition.) </title/276/23376/1573950>.

[40] This idea is expressed very clearly in a letter he wrote to Mme. Cheuvreux on June 23, 1850, where Bastiat talks about how history is divided into two phases in an apparently never-ending class war to control the state: "As long as the state is regarded in this way as a source of favors, our history will be seen as having only two phases, the periods of conflict as to who will take control of the state and the periods of truce, which will be the transitory reign of a triumphant oppression, the harbinger of a fresh conflict." See Collected Works vol. 1, 176. Letter to Mme Cheuvreux (Les Eaux-Bonnes, 23 June 1850), pp. 251-52. </title/2393/225931>.