The Jonathan Swift of Economics

July 4, 2022
 
I recently published a “Liberty Classic” book review of Economic Sophisms for Liberty Fund.
Here are a few excerpts:
No one defends the cause of free trade against protectionism, individual freedom over central planning, and opportunity contra privilege more aptly than the Jonathan Swift of economics, Frédéric Bastiat. Jonathan Swift—really? It’s high praise, but then again, Bastiat is humankind’s most quotable economic writer.
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Furthermore, argues Bastiat, if protectionism makes a country rich, so would a host of other policies, which—while seemingly ridiculous—share with tariff policy their ability to increase employment, “improve” the balance of trade, and bolster domestic industry. For instance, in the Second Series, Chapter Seventeen, Bastiat recommends to the king that: “… you forbid your loyal subjects to use their right hands.” A seemingly curious suggestion, but not when one adheres to the errors of the protectionists. To see why, Bastiat offers us this helpful syllogism:
The more one works, the richer one is. The more difficulties one has to overcome, the more one works. Ergo, the more difficulties one has to overcome, the richer one is.
Bastiat hastens to explain that despite this policy’s seeming innovativeness, the proposal cleaves to tradition. It is nothing but protectionism by another name.
And therein lies the devastating impact of Bastiat’s rhetorical tactic, which he deploys repeatedly throughout Sophisms, until one is left wondering how anyone anywhere has ever possessed the temerity to suggest that maybe, just maybe, government could improve its citizens’ overall welfare if it but curtailed their freedom.
Timelessly crafted as they are, Bastiat’s thought experiments still inspire economic communicators today. Another classic is the “negative railroad,” allusions to which he sprinkles throughout Sophisms. France builds railroads, bridges, and canals to England that yield lower transportation costs. But when those lower costs result in more trade between the countries, France “corrects” the “imbalance” with a tariff to reduce imports. A tariff, therefore, performs the reverse function of a railroad. If we think a railroad is beneficial because it enables us to consume more and better goods, what does that imply of protectionist measures that raise the costs of exchange? This thought experiment, and his numerous transportation metaphors more generally, remain staples of Econ 101 classrooms the world over.
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One key theme animates Sophisms. Consumption, not production, is the end—the goal—of all economic activity. Production is only valuable because it yields goods that enable people to satisfy, through consumption of those goods, their wants. Production for production’s sake—the unspoken implication of protectionist policy—is like driving in circles with little doubt that you will still somehow reach your destination. Yet, at the same time, Bastiat shows that policy exhibits a “producer bias,” over and against “consumers.” Tariffs benefit producers at consumers’ expense, for instance. Subsequent Public Choice concepts, notably “concentrated benefits and dispersed costs,” explain why.
My own reading is doubtlessly anachronistic, but in Sophisms, I also detect prescient glimpses of profound economic concepts, usually credited to twentieth-century thinkers. He captures Franz Oppenheimer’s distinction between the “economic” and “political” means of acquiring wealth (Second Series, Chapter One). In Second Series, Chapter Six, Bastiat hints at the “transitional gains trap,” usually associated with Gordon Tullock. His insights regarding the lower productivity of forced labor (Second Series, Chapter One) foreshadow many conclusions of the contemporary economics of slavery literature. First Series, Chapter 4 sees Bastiat explaining that the fruits of innovation diffuse quickly to consumers, rather than merely benefitting the original innovator—again, consistent with contemporary microeconomic theory. And even many of his arguments about trade hold up under the scrutiny of sophisticated modern-day economic theorists. For instance, Sophisms emphasizes that the poorer country tends to benefit disproportionately from free international trade than does its wealthier trading partner, though they’re both made better off.
Plus, Bastiat is downright fun to read, not exactly something many economists can claim. His examples are always colorful, sometimes humorous. In discussing those who imagine there are no universal economic laws, Bastiat addresses himself to “an old man undefiled by principles,” (First Series, Chapter Ten). While arguing against the “protectionists” for the umpteenth time, he notes that their schemes will: “… reduce all men to the snail’s life of isolation” (First Series, Chapter Four) and that they would “… force men to live like snails, each in his own shell” (First Series, Chapter Thirteen). Vivid language like this makes reading Sophisms a frolic.
His thought experiments likewise leave bemusement in their wake. See Second Series, Chapter Nineteen for a humorous discussion between Robinson Crusoe and Friday, as Friday (unsuccessfully) attempts to convince Crusoe that embracing trade relationships with a “handsome foreigner” is beneficial even if it does “mean the end of our hunting industry.” It’s one thing to explain how social cooperation under the division of labor makes us better off, but it’s quite another to do it by way of Bastiat’s colorful and waggish dialogue.
With apologies to Kenneth Boulding, we might ask: “after Krugman, who needs Bastiat?” It’s an interesting comparison because the two topics most associated with Bastiat—trade and “broken windows”—are the same two closely associated with Paul Krugman, who won his Nobel Prize for trade theory and who advocates dinosaur Keynesianism in much of his public communication. Most of us would gladly welcome Bastiat’s corrective on matters of demand management, but it would be a mistake to think that the moderns have incorporated all there is to know from the past on issues of exchange, subsidy, and other policy issues at which Bastiat so skillfully takes aim. It is time that all of us—from beginners in economics to seasoned scholars—invite Bastiat into what Boulding called our “Extended Present.” To borrow from one of Bastiat’s favorite analogies, we will thus build a railroad from past to present—though in this case, the gains from trade will be all ours.