Liberty Matters

A Theory about Doing Nothing

It was a pleasure to read Prof. Leroux's paper on Bastiat's thought, his place in economics, and his place in the French intellectual community. I have always wondered if Bastiat's ability to explain just what he meant, and to go clearly to the heart of the matter, served him ill. I propose a "sociology of science" exercise, as an extension of the observations Prof. Leroux offers us.
Bastiat was ahead of his time, in two ways. First, marginalism and subjectivism had not yet been developed, so Bastiat had to rely on his intuition. But economics is notoriously unintuitive, especially on first contact, for most people. Second, Bastiat's contributions support "a theory about doing nothing." This was more than a century before the sitcom Seinfeld, a "show about nothing," debuted in July 1989. Worse, Seinfeld was a sitcom.
A theory that advocates doing nothing is likely to be laughed at, too, even if it is correct. Social problems seem serious and seem to require serious people doing serious things. Bastiat wrote simply and clearly, with humor, and showed that nearly anything the state could actually do would make things worse. How could that be a theory?
The Problem of Clear Explanation
I would ask that the reader consider three theoretical premises, and one empirical premise, on the way to a conclusion.
Premise 1: It is more difficult to write clearly than to obfuscate. This is true in direct proportion to the difficulty of the concepts being written about. Simple concepts can be described clearly, though it is not easy. Hard concepts are extremely difficult to describe clearly.
Premise 2: Ideas not already shared by the reader will cause most readers to reject the new ideas and in many cases even to fail to think about the ideas very deeply. Having one's mind changed is an uncomfortable business; being wrong about fundamental ideals regarding society and the world are especially uncomfortable.
Premise 3: Clarity by its nature reduces ambiguity. Ambiguity allows the reader to attribute to the ambiguous writer opinions or claims that are not really there. Ideally, the argument is so ambiguous that nothing is "really there" - à la Rousseau or Derrida - so that the theory is a kind of intellectual tofu, absorbing whatever flavors the reader most wants to mix in. Clear writers will therefore find fewer people who agree with them at first contact with new ideas.
Empirical Premise 1: Simply as a matter of fact, most people find ideas about economics to be extremely difficult and complex. In particular, the idea that problems will be solved if the state does nothing are particularly counterintuitive.
Conclusion: Those who claim Bastiat is "not a theorist" are confused. Most theorists, to be sure, are ambiguous, unclear, and obfuscatory. But it does not follow that anyone who fails to be ambiguous, unclear, and obfuscatory is therefore not a theorist. Still, opaqueness is an advantage: Some of the "great" economic theorists, such as Marx, Veblen, or Keynes, are revered precisely because none of their claims can be understood. But this is not apithology, but pathology. Once it is recognized that clarity and precision are actually virtues, rather than flaws, it becomes obvious that Bastiat was not only a theorist but a theorist of the first rank.
Bastiat and a Theory About Doing Nothing
Bastiat was one of the first writers, predating even the Austrian subjectivists, to recognize the problem of uncertainty and ignorance in human affairs. For this reason, he is skeptical of the claims of those that "we" "know" what to do. It would be surprising if there is a "we," or a coherent and active collective will, in economic affairs. And it is impossible to imagine that "we," if it did exist, could "know" all the complex facts and means-ends relations that would be required to plan and execute the activities that market processes are able to carry out with neither a coherent "we" nor anything like "knowing." To the social theorist interested in what we should do, based on what we know, Bastiat's claims seem like nihilism, the antithesis of theory. In effect, it is a theory about doing nothing.
There are many examples, but one of the clearest (and most interesting, from the perspective of modern Austrian economics works on entrepreneurs and commerce) can be found in one his greatest works, "What is Seen and What is Not Seen" (1850, Chapter 6, "Middlemen.") It is worth quoting at length[41]:
[The] schools of thought are vehement in their attack on those they call middlemen. They would willingly eliminate the capitalist, the banker, the speculator, the entrepreneur, the businessman, and the merchant, accusing them of interposing themselves between producer and consumer in order to fleece them both, without giving them anything of value. Or rather, the reformers would like to transfer to the state the work of the middlemen, for this work cannot be eliminated….[Regarding the famine of 1847,] "Why," they said, "leave to merchants the task of getting foodstuffs from the United States and the Crimea? Why cannot the state, the departments, and the municipalities organize a provisioning service and set up warehouses for stockpiling? They would sell at net cost, and the people, the poor people, would be relieved of the tribute that they pay to free, i.e., selfish, individualistic, anarchical trade."…When the stomach that is hungry is in Paris and the wheat that can satisfy it is in Odessa, the suffering will not cease until the wheat reaches the stomach. There are three ways to accomplish this: the hungry men can go themselves to find the wheat; they can put their trust in those who engage in this kind of business; or they can levy an assessment on themselves and charge public officials with the task. [pp. 19-20]
It may take a moment to realize that the problem here has a theoretical answer: Any action the state takes will impede the natural response of middlemen, and make things worse. The correct thing to do is nothing. What kind of theory is that?
There are three ways of getting food from farm to market. First, every consumer goes off on his own, with a cart, and transports back the grain his family needs. Second, middlemen can buy, transport, and resell the products. Third, the state can buy, transport, and resell the products, or give the products away for free once they have been transported.
No one seriously advocates the first alternative, where consumers go get the grain. It's too far, and besides they would to feed themselves during the trip. That leaves only options 2 and 3, meaning that the state must either do nothing-and in fact remove impediments to entrepreneurial action-or else the state must itself transport and distribute the grain.
Those concerned about equality might claim that the state can always perform the function of middlemen more fairly because the motivation is public service, not profit. And the state can always do it more cheaply because the costs of profit are not part of the process. But this is disastrously wrong. First, agents of the state are not, in fact, motivated by the public interest. They are no better than anyone else and act first to benefit themselves. Second, without the signals of price and profit provided by middlemen, no one knows what products should be shipped where or when. In short, without middlemen the state would act more slowly, less accurately, and at the wrong times.
Further, profit is crucial, and beneficial. It is because of profit that middlemen create value. And the seeking of profit by middlemen, buying cheap and selling dear, ensures that, as Bastiat put it, the "wheat will reach the stomach" faster, more cheaply, and more reliably than any service the state could possibly create. The system of middlemen performs what seems a miracle:
Directed by the comparison of prices, [middlemen distribute] food over the whole surface of the country, beginning always at the highest price, that is, where the demand is the greatest. It is impossible to imagine an organization more completely calculated to meet the needs of those who are in want.... (Bastiat, 1850, chapter 6, p. 21)[42]
Bastiat's insight is remarkable, because it is intuitively a theory about doing nothing. The fact is that middlemen don't require perfect markets, or the conditions of perfect competition provided by state action and regulation. Most important, actions taken by the state to achieve perfection achieve the opposite, no matter how earnest their intentions. Unexpectedly, middlemen themselves are the means by which markets become "perfect." Arbitrage and bargain-hunting is the discipline that ensures a single price, providing accurate signals on relative scarcity and engendering enormous flows of resources and labor towards higher valued uses.
[41] Frédéric Bastiat, What is Seen and What is Not Seen (1850) in Selected Essays on Political Economy, trans. Seymour Cain, ed. George B. de Huszar, introduction by F.A. Hayek (Irvington-on-Hudson: Foundation for Economic Education, 1995). </title/956/35425>.
[42] Bastiat, What is Seen and What is Not Seen (1850), Chapter: 6. Middlemen </title/956/35432>.