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Foreword

“The state is the great fiction by which everyone endeavors to live at the expense of everyone else.”

—FROM “THE STATE” (1848), BY FRÉDÉRIC BASTIAT

Claude Frédéric Bastiat was born in France in 1801. Two hundred years later, in 2001, I was invited to speak at his birthday celebration.1 I titled my remarks “Why Bastiat Is My Hero.” That was over ten years ago, but I do not have to look back into my notes to remember the reasons why Bastiat was and still is my hero.

During his brief life of forty-nine years, Bastiat fought for individual liberty in general and free trade in particular. He fought against protectionism, mercantilism, and socialism. He wrote with a combination of clarity, wit, and wisdom unmatched to this day. He not only made his arguments easy to understand; he made them impossible to misunderstand and to forget. He used humor and satire to expose his opponents’ arguments as not just wrong, but absurd, by taking them to their logical extreme. He noted that his adversaries often had to stop short in their arguments to avoid that trap.

My introduction to Bastiat as a student was snippets from his “Petition by the Manufacturers of Candles” in economics textbooks. The brilliance of this text still thrills and inspires me.2 In the petition, the candle makers call on the Chamber of Deputies to pass a law requiring the closing of all blinds and shutters to prevent sunlight from coming inside. The sun was unfair

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competition to the candle makers and they needed protection. Protection from the sunlight would not only benefit the candle makers and related industries competing with the sun; it would also benefit unrelated industries as spending and prosperity spread. Bastiat anticipated Keynesian multiplier analysis, although for Bastiat it was satire with a very serious intent.

Bastiat wanted Economic Sophisms to serve as a handbook for free traders, and, indeed, when I was president of the Federal Reserve Bank of Dallas, we used his writings in our economic education efforts. Throughout the book, Bastiat attacks protectionist sophisms, or fallacies, methodically and exhaustively; however, he identifies a major problem of persuasion, namely, that most sophisms contain some truth, usually a half-truth, but it is the half that is visible. As he writes in his introduction: “Protection brings together in one single point all the good it does and distributes among the wider mass of people the harm it inflicts. One is visible to the naked eye, the other only to the mind’s eye.”3

For example, we can see for ourselves imports and new technology destroying domestic jobs. We can see government spending creating jobs, and minimum wage laws raising wages. To get from these half-truths to the whole truth, however, requires considering what is not seen, except “in the mind’s eye.”

The fable of the broken window is Bastiat’s most famous illustration of the seen versus the unseen.4 The son of Jacques Bonhomme5 broke his window, and a crowd gathered. What a shame; Jacques will have to pay for another window. But wait. There is a silver lining. The window repairman will receive additional income to spend. Some merchant will then also have new income to spend, and so on. It’s a shame about the broken window, but it did set off a chain reaction of new spending, creating prosperity for many.

Hold on, cautions Bastiat. If Jacques didn’t have to replace his window, he would have spent or invested his money elsewhere. Then another merchant would have new income to spend, and so on. The spending chain initiated by the broken window happens and will be seen; the spending chain that would otherwise have happened won’t be seen. The broken window diverted spending; it didn’t increase spending. But the stimulus from the broken window was seen, and seeing is believing.

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The broken window fallacy sounds like a child’s fairy tale, yet nothing could be more relevant today. We’re told every day of the benefits of some government program or project, and most do some good. What we don’t see is how taxpayers might have spent their own money for their own good. Or, if the government spending is financed by borrowing, we probably won’t see the implications for the future burden of the additional debt, or for future inflation if the debt is monetized. We forget that governments can give to us only what they take from us.

Bastiat’s lectures on the half-truth versus the whole truth, the short run versus the long run, the part versus the whole, and the seen versus the unseen teach us the economic way of thinking. While he was steeped in classical economics, his views were also based on what he experienced empirically. All he had to do was walk around the port city of Bayonne where he was born to see firsthand the disastrous results of “protection.” The protection was protection from prosperity.

Bastiat was also influenced by the free-trade movement in England and its leader, Richard Cobden, who became a regular correspondent and firm friend for the last five years of Bastiat’s life. Bastiat wanted to do for France what Cobden was doing for England, so he became an activist, establishing free-trade associations. He entered politics and was elected to the Chamber of Deputies. Many of his speeches, pamphlets, and other articles were directed specifically to statements made by his opponents in that chamber. He named names, but he was ever the gentleman in his debates, attacking the argument rather than the person.

In debate, Bastiat not only proved his opponents wrong; he showed that their positions, when stripped to the core, were absurd. Their focus on the producer rather than the consumer led them to view less output as better than more, and more work to achieve a given end as better than less. Consumers have a stake in efficiency and productivity, and their goals are in harmony with the greater good. Producers, on the other hand, find merit in inefficiency and obstacles to productivity. They wanted to count jobs, while Bastiat wanted to make jobs count. He exposed the absurdity of the fallacy when he suggested allowing workers to use their left hands only and creating jobs by burning Paris.

Bastiat pointed out that the lawmakers who were also merchants or farmers held conflicting positions. Back home they value efficiency and productivity, trying to get the most output and income from the least labor. Yet, as legislators, they tried to make work by creating obstacles and inefficiency.

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They built roads and bridges to facilitate transportation and commerce, then put customs agents on the roads to do the opposite. He pointed out that if they farmed the way they legislated, they would use only hoes and mattocks to till the earth and eschew the plow.

The obvious question is, if Bastiat’s rhetoric was so effective, why didn’t he prevail in the Chamber? His opponents’ answer then, as now, is that these fancy notions may work in theory, but not in practice. “Go write your books, Mr. Intellectual; we are men of practical affairs.” We might, however, answer on behalf of Bastiat that, in the short term at least, the fight against protectionism was sidetracked by the outbreak of the 1848 Revolution and the rise of socialism during the Second Republic. Bastiat, like many of his free market colleagues, had other matters to attend to during this period. In the medium term, we might say that Bastiat’s free trade ideas did in fact have an impact. The signing of the Cobden-Chevalier Trade Treaty between England and France in 1860 is one important measure of the success of free trade ideas, at least in the middle of the nineteenth century. In the longer term, unfortunately, he, as do we today, underestimated the power that economic sophisms have over the popular mind in general and even over most of our legislators in particular. This confirms the importance of returning to Bastiat’s ideas, for the power of his economic arguments as well as for the enjoyment of his inimitable brilliant style. So, even after more than ten years, Bastiat remains “my intellectual hero.”

Robert McTeer