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Source link: http://archive.mises.org/11318/the-long-shadow-of-frederic-bastiat/

The Long Shadow of Frédéric Bastiat

December 25, 2009 by

Frédéric Bastiat’s legacy has two key components: his artful polemics for free markets and his uncompromising conviction that men’s interests are “naturally harmonious” to the extent that their property rights are respected. FULL ARTICLE by George Smith

{ 8 comments }

Luis Ramirez December 25, 2009 at 9:02 am

“Only a special writer can expose flawed ideas in such a way that lay readers will understand and remember them. Bastiat’s chief expository techniques were hyperbole and ingenious use of reductio ad absurdum. In addition to these, he often reminded his readers that men had unlimited wants but only limited resources. Rather than adduce from this that nature subjected people to a state of perpetual conflict, he held that men’s interests were naturally harmonious.”

As many great thinkers, Bastiat had the gift of clarity of thought, making his explanations of complex matters greatly accessible. The classic example would be his famous “Broken Window Fallacy”. He had a teacher´s vocation.

Deefburger December 25, 2009 at 11:46 am

Bastiat had a natural understanding of systemic hierarchy and properties and their true relationship to the fundamental elements that comprise the systemic object. He was not fooled by the creation of attributes of “greater” importance by those who would put the larger system above the component fundamental elements.

“But your theory, he tells Ferrier, promotes the absurdity that what is good for an individual, family, commune, or province, is bad for a nation, as if a nation were somehow different from the people who comprise it.”

Here he makes this point clear. The Nation, as a systemic object comprised of Individuals, does not have an experience of itself that is not derived directly through the experience of the individuals that are the substance of the system.

This is the primary argument against collectivism, stateism, and every other form of “ism” that places the group above and beyond the experience of the individuals themselves.

Bastiat also recognized that the systemic object could be reduced to a single individual as a proxy for the larger group. He understood that ultimately, any interaction with the system and an individual was via another individual, who, in that exchange is the larger systemic object by proxy.

What he seems to have understood was what today is known as Superposition Theorem.

In the broken window argument, he recognized that the loss of the window was not a gain for the system. The system also had a loss that resulted in a zero sum for the system, as well as a loss for the man who lost the window. Add the man back into the system and the system realizes a loss in the summation.

Had the window not been broken, the system would have seen the gain of the 6 francs when the cobbler sold his shoes, and the man would have seen gain with the acquisition of the shoes, and no loss of a window. Add the man back into the sum of the system and the system sees an overall gain. The glazier did not lose anything, because there was no window involved. His time was spent elsewhere presumably for his own gain.

Bastiat was a genius.

John B December 25, 2009 at 2:53 pm

Thank you for the article.
I am sure Bastiat would have approved of the liberal educational style that informs without control or condescension.
Freedom!

Fallon December 25, 2009 at 8:03 pm

I must read Harmonies etc. and see whether Schumpeter’s charge sticks or not.

Great article, George Smith.

pbergn December 26, 2009 at 6:18 pm

Good article, however I disagree with Bastiat and the author by implication, that there are clear conclusions that can be drawn based on the simplistic analysis of business reality under market conditions…

I believe it is very hard to predict in general terms what would be beneficial to the given society as a whole (in terms of the net sum of the wealth of all market participants). For example, the tariffs may be very useful under certain conditions, an detrimental – under the others… I would not be so bold as to make absolute claims when it come to the matters of economy and market interactions…

And frankly, I can’t see why Bastiat couldn’t formulate the truth behind economic reality in one eloquent sentence, such as: “There are many dogs, but only one bone, and the question is – who gets it…”

No, seriously. There are many voluminous tomes written on the subject, but it does not take a genius or two to see that this is all about wealth re-distribution – the struggle for limited resources… Nothing more, nothing less…

So, in his “Broken Window Fallacy”, Bastiat overlooks the essence of the problem – the re-distribution of wealth. That’s all there is to it – who gets to eat, and who stays hungry… In this “fallacy”, the author is trying to convince us that society overall loses if the window breaks…

What I can demonstrate, is that it is not necessarily true – the society as a whole, in fact might get richer in the long run if there is additional business opportunity created in the market, or an event forcing to change the time preferences of the market participants, resulting in the increase of production activity…

The true non-trivial question in “Broken Window Fallacy” is who actually gets the business, and who will have to change his or her time preferences for money, either voluntarily of by compulsion of circumstances…

It is true, that if the window did not break, the owner of the shop would have been richer, since he would have a window and the new shoes, and the shoemaker would have been richer, since he would have sold a new pair of shoes… The loser in the “non-broken” windows scenario is the glazier… However, in the case when the window IS broken, the loser is ONLY the window owner, and NOT the shoe maker, since the glazier could have bought a new pair of shoes for himself as well on the compensation paid to him against his services of replacing the window…

So, in this example, there is NO net loss to the society as a whole – since window-owner’s loss – is the glaziers and shoemaker’s gain. It’s a matter of simple wealth re-distribution.

Now, as a contrary example, if the window did NOT break, the window owner, might have preferred to sit on his extra savings for a while (hoarding), perhaps waiting for the prices of shoes to drop, resulting in the shoemaker working at a loss or at a smaller marginal profit, or even forcing him out of business, since window owner has longer time preference for money, but the shoemaker, or the glazier for that matter, can’t have that luxury, since as active entrepreneurs, they have to pay for the materials or the labor they already employ as part of their business…

CONCLUSION:

It is non-trivial matter to try to quantitatively evaluate the net gains or losses of a society as a whole in terms of missed or utilized new business opportunity under the market conditions… Only a thorough analysis of a particular case can have a chance of succeeding…

Gerry Flaychy December 26, 2009 at 9:15 pm

1- Consumption side.

At the end, in the ‘seen case’,
the shopkeeper gets a window;
and in the ‘unseen case’, he gets a window and a pair of shoes.

2- Production side.

When the 6 francs is spent on the glazier, it is not spent at the shoemaker, and vice versa.

It does not matter if this 6 francs begin to be spent in the economy with the glazier or with the shoemaker: in either case, it will causes money to circulate, and the encouragement of industry in general will be the result of it.

From the viewpoint of the overall production,
that the 6 francs goes first to the glazier and then to the shoemaker and after to the rest of the economy;
or goes first to the shoemaker and then to the glazier and after to the rest of the economy, there is no difference, no change.

Thus the only change is on the consumption side, and it is favorable to the ‘unseen case’.

Summary:

Consumer = 1 window
Consumer = 1 window + 1 pair of shoes
Consumer = gain of 1 pair of shoes
———————————————–
glazier = 6 francs
shoemaker = 6 francs
General production = 6 francs : no gain

http://bastiat.org/en/twisatwins.html#broken_window

cavalier973 December 27, 2009 at 9:42 pm

I don’t agree with the argument that it makes no difference for economic growth whether the shoes are purchased by the shopkeeper or the glazier.

The situation where the shopkeeper must purchase a new window indicates that resources are being used that might have been used for other purposes. That is, the glazier must spend labor and glass-making materials to replace a perfectly good window instead of using labor/materials for, say, making windows for new housing. The resources used to make the first window can now be counted as having been wasted. Also, the shopkeeper is bidding up the price of the scarce resources of the glazier’s time and materials. Anyone else who wanted a window must now pay more for it.
If everyone had windows that never broke, then it’s true that the glazier would possibly be out of a job, but that would free up his equipment and materials and labor for the production of other things, like glass vases and dinnerware.

As an aside, this discussion reminds me of my favorite Chaplin film, “The Kid”

http://www.youtube.com/watch?v=qNseEVlaCl4

Gerry Flaychy December 28, 2009 at 1:02 pm

What has to be done is to compare the broken case and the non-broken case relatively to each other.

There is a gain for the consumer, Mr. Goodfellow, in the non-broken case relatively to the broken case.

For the general production, there is no gain and no loss, in either case relatively to the other.

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