Economic Ideas: Frédéric Bastiat on the Law of Liberty and Free Markets

by Richard Ebeling

Image of Bastiat compliments of FEE.org

The defense of economic liberty has never been an easy task. Adam Smith expressed his own despair at this problem in The Wealth of Nations. After presenting his powerful criticisms of mercantilism—the eighteenth-century system of government regulation and planning—he despondently suggested that free trade in Great Britain was as unlikely as the establishment of a utopia.

He said that two factors made the success of economic liberty unpromising. “Not only the prejudices of the public,” Smith said, “but what is much more unconquerable, the private interests of many individuals, irresistibly oppose it.”[1] By the prejudices of the public, Smith meant the apparent difficulty of many ordinary people to follow the often abstract and complex arguments of the economic theorist that demonstrate the superior workings of the free market over various forms of government intervention and control. And by the private interests of many individuals, Smith had in mind the wide variety of special-interest groups that gain from, and would therefore always lobby hard to maintain, government regulations that limit or prevent open competition. In combination, Smith feared, these two factors would permanently prevent the logic of economic freedom from ever winning in the arenas of ideas and politics.

In the nineteenth century, however, there was one champion of freedom who mastered the art of making the complexities of economic reasoning understandable to the layman: the French classical-liberal economist Frédéric Bastiat. More than one historian of economic thought has emphasized Bastiat’s special abilities in undermining the rationales for protectionism, socialism, and interventionism.

Other authors have modeled some of their own works after him. At the beginning of the twentieth century, the French free-market economist Yves Guyot said that his own little book, Economic Prejudices, was offered in the footsteps of Frédéric Bastiat, with the purpose of “[setting] forth truths in a handy, convenient form that is easy to remember, to criticize errors by means of proof that anyone can apply,” as Bastiat had done half a century earlier. And surely the most famous and influential adaptation of Bastiat’s method and approach in the twentieth century was Henry Hazlitt’s Economics in One Lesson, in which the author said, “The present work may in fact, be regarded as a modernization, extension and generalization of the approach found in Bastiat’s pamphlet,” known by the title “What Is Seen and What Is Not Seen.”

Bastiat’s Life and Discovery of the Liberty Literature

Claude Frédéric Bastiat was born on June 30, 1801, in Bayonne, France, the son of a prominent merchant. His mother died when he was seven years old, and his father passed away two years later, when Frédéric was only nine. He was brought up by an aunt, who also saw to it that he went to the College of Sorèze beginning when he was 14. But at 17 he left without finishing the requirements for his degree and entered his uncle’s commercial firm in Bayonne. Shortly afterward he came across the writings of the French classical-liberal economist Jean-Baptiste Say, and they transformed his life and thinking. He began a serious study of political economy and soon discovered the works of many of the other classical-liberal writers in France and Great Britain.

In 1825 he inherited a modest estate in Mugron from his grandfather and remained there until 1846, when he moved to Paris. During these 20 years Bastiat devoted almost all his time to absorbing a vast amount of literature on a wide variety of subjects, sharing book and ideas with his friend Félix Coudroy. It seems that Coudroy had socialist leanings, and Bastiat began to refine his skills in clear thinking and writing by formulating the arguments that finally won over his friend to a philosophy of freedom.

In the late 1820s and 1830s he began writing monographs and essays on a variety of economic topics. But his real reputation as a writer began in 1844, when he published a lengthy article in defense of free trade and then a monograph on Cobden and the League: The English Movement for Free Trade. While writing these works Bastiat began a correspondence with Richard Cobden, one of the primary leaders of the British Anti-Corn Law League, the association working for the repeal of all barriers to free trade. The two proponents of economic freedom became fast friends, supporting each other in the cause of liberty.

The success of these writings, and the inspiration from the success of Cobden’s free-trade activities in bringing about the end of agricultural protectionism in Great Britain in 1846, resulted in Bastiat’s moving to Paris to establish a French free-trade association an to start Le Libre Éxchange, a newspaper devoted to this cause. For two years Bastiat labored to organize and propagandize for free trade.

At first he was able to attract a variety of people in commerce and industry to support his activities, including delivering speeches, designing legislation for the repeal of French protectionism, and preparing writings to change public opinion. But it was to no avail. There were too many special interests benefiting from privileges and favors given by the government, and he was unable to arouse a sustained interest in his cause among the general public. It appeared that Adam Smith had been right in lamenting the prejudices of the public and the power of the interests, at least in France.

Following the revolution of February 1848, Bastiat began a career in politics, serving first in the French Constituent Assembly and the in the Legislative Assembly. Having devoted most of his previous writings to demonstrating the fallacies in the arguments for protectionism, Bastiat turned his attention to a new enemy of economic liberty: socialism. In the Legislative Assembly, he delivered powerful speeches against public-works programs, guaranteed national-employment schemes, wealth-redistribution proposals, nationalization of industry, and rationales for the expansion of bureaucratic controls over social and economic life. But because of a worsening tuberculosis that weakened his voice, he turned to the written word, producing a large number of essays detailing the absurdities in the arguments of the socialists.

Bastiat made his last appearance in the Assembly in February 1850. By spring of that year his health had declined so dramatically that he was forced to step down from his legislative responsibilities and spend the summer in the Pyrénées mountains in the south of France. He returned to Paris in September and visited his friends in the cause for free trade, before setting out for Italy in search of a cure for his tuberculosis. He died in Rome on December 24, 1850, at the age of 49.

The Law of Liberty versus the Politics of Legalized Plunder

Frédéric Bastiat’s intellectual legacy in the fight for economic freedom is contained in three volumes. Two of them are collections of some of his most biting, witty, and insightful essays and articles, and are available in English under the titles Economic Sophisms and Selected Essays on Political Economy. In his last years, Bastiat devoted part of his time to a general work of social philosophy and economic principles, published under the name Economic Harmonies.

(The Liberty Fund of Indianapolis is now in the process of publishing the complete works of Frédéric Bastiat in new translations and including many of Bastiat’s writings not previously available in English.)

Bastiat is, perhaps, most famous for an essay on The Law, which he wrote shortly before his death in 1850. He asks, what is the purpose of the law? And he answers that it is to protect every individual’s natural right to his life, liberty, and honestly acquired property.

He reasons that every man, as a human being, has a right to his own life – none can claim to enslave him or kill him. Life is given to each individual by a “Higher Authority,” which no man may take away. But to sustain his own life, each individual must have the additional and complementary right to his personal liberty, so as to act in ways that he finds necessary or useful to maintain and improve his life.

Furthermore, if a man is to survive and prosper he, also, must be recognized as possessing the right to property in land and resources, and the products he extracts from that land and those resources that have been molded by his mental and physical efforts.

These rights precede any establishment or form of government. They follow from man’s nature, and all reflective, reasonable men would agree and assent to the rightness of such claims to liberty. Otherwise, how could any man assert a right not to be molested by others who may be stronger than himself?

The purpose of government, and the law, therefore, is to prevent and punish “Illegal plunder.” That is, the unrightful taking of another man’s property (including his life). Thus, the role of the law is to uphold morality and justice. Because it is both immoral and unjust to violate another man’s right to his life, liberty and honestly acquired possessions.

But, says Bastiat, the law can be “perverted.” Instead, of protecting people from the plundering of others, the law can be used to serve the act of plundering. Thus, the law can be made into a system of “legal plunder.”

Bastiat argues that there are three ways of organizing the political system of a society: Either the few plunder the many; or, the many plunder the few, or attempt to plunder each other; or no one plunders anyone else, under a system of protection for everyone’s right to their own honestly acquired property.

Under the rule of absolute kings, favors and privileges at the expense of others were given to those who were close to and could influence the economic policies of the monarch. It was a system of political plunder by a few at the expense of the many in society.

But under democracy, the process of political plunder has been democratized, Bastiat warns. Now all groups in society use their voting power in an attempt to lobby and influence those holding political office to grant them favors and privileges at the expense of other individuals and groups, who are also attempting to do the same.

Thus, Bastiat concluded that in the democratic society, the government becomes a great fiction through which everyone tries to live at the expense of everyone else. The cumulative consequence of this is a vast waste of resources and wealth in the competition for political favors, rather than the production of useful goods and services to sell to consumers on the market.

The Sources of Legalized Plunder – Robbery and Wrong-Headed Charity

Bastiat believed that there were two primary ideas behind the establishment of legalized plunder: “Stupid greed.” Bastiat means a desire for obtaining the wealth of others which they find themselves unable to acquire through the open, honest competition of the market place.

Hence, individuals and groups lobby those with political power for: Trade protections from more efficient foreign competitors; Anti-competition regulations that restrict domestic rivals in their part of the market; Government subsidies to cover costs of production that consumers are unwilling to pay because they do not value the goods these producers offer on the market. “False Philanthropy.” Bastiat means those who believe that they know what is good for people and therefore want to use government to create outcomes in society different from what they might have been if people had been left alone to make their own choices and spend their own money as they thought best.

Some in society lobby and try to influence government policy to: Redistribute income and wealth by taxing one segment of society and giving it to others in that society; Tax people to undertake: spending projects for public education; or support for the arts; or public works projects; or charity work.

Bastiat argues that such compulsory philanthropy results in an undermining of real morality, by taking away from people the means to make choices about ethical issues concerning the spending of their own money. It also results in politicians and the social engineers advocating these programs coming to view others in society as objects to be controlled and manipulated. This brings about the dehumanizing of people, and the loss of personal freedom of choice.

Bastiat calls for the end to all forms of political and legal plunder. In its place there should be a system of liberty in which all have the same individual rights, protected by law and government – not violated and abused by government.

What is Seen and What is Not Seen in Economic Understanding

One of Frederic Bastiat’s most famous other essays is, “What is Seen and What is Not Seen.” He argues that too often people only see and appreciate the immediate or “present” effect of an event or action, and do not give sufficient consideration to the longer-term or more indirect and less immediate consequences.

He considers this to be especially the case when analyzing various types and forms of government policy. He first explains this in terms of what he calls the “broken window” fallacy. A young boy throws a brick through the plate-glass window of a bakery store. At first, a crowd of people form and criticize the destructiveness caused by the young vandal. But, then, someone in the crowd says, “Well, yes, this is a misfortune for the store owner, who has to pay to replace the broken window. But think of the extra work and the jobs for those in the glass-window industry, who will make money, hire a worker, and raise his income.”

But what is not seen, says Bastiat, is that the storeowner and the society in general are made poorer due to this destruction. If the window had not been broken, the storeowner might have spent the replacement money on buying, instead, a new oven to add to the production and supply of bread available to consumers in society.  Or he might have bought a new coat for his wife or new shoes for his daughter, which would have generated employment and income in the clothing or shoe industries.

Either way, the storeowner and society would have had the window and these other goods, all of which also would have created employment and income for those making these different things. Instead, the owner and society have to use scarce resources just to produce what it already had – a window – and, thus, economic improvement is delayed or prevented.

Government Jobs versus Private Sector-Generated Employment

Bastiat, then, applies this concept to several examples, for instance, to military demobilization. Often after a war, and when a large number of soldiers are to be let go from military service, the concern is expressed that if government does not employ and pay these servicemen, how will then make a living, and how will “society” avoid high unemployment. Releasing these people from military service, and their loss of employment in the armed forces is what is seen.

What is not seen, Bastiat reminds us, is that when government no longer needs such a large military and lowers taxes that have paid for the use of these soldiers, private citizens will want to spend that greater amount of money now in their pockets; this will create the alternative employments and productions to satisfy, now, private sector demands for goods and services, instead of the government’s demand for these men and resources for military purposes.

Furthermore, when employed through taxes in the military, these soldiers have devoted their efforts for purposes of potential destruction. Now, when freed from military service, their labor skills and other resources are available for the constructive purposes of producing goods and services to improve the standards and quality of life of the citizenry, as a whole.

Misguided Trade Restrictions and Protectionism

Another example that Bastiat draws upon is that of restraint of trade. It is very common for domestic producers to demand “protection” from the competition of foreign producers. They argue that allowing the foreign competitor to seller his product in the domestic market may “steal” jobs away from domestic workers, especially if the foreign seller offers it for a lower price than the domestic seller.  Any jobs “saved” or “created” by protecting the domestic producer from foreign competition is, What is Seen.

What is Unseen are the jobs might have been created because: The foreign seller earns dollars to buy some attractive goods from the domestic country’s producers, and this would result in more jobs in the import industries to pay for the larger number of exports from that foreign country.

If the foreign seller can sell the product at a price lower than the domestic producer, then consumers obtain a desired good at a lower cost. They now buy, for instance, the foreign version of the product for $5, instead of paying $10 to the domestic producer for the same product. This leaves $5 more in the pockets of the domestic consumers to increase their demands for products they previously could not afford. This creates more jobs in domestic industries, and raises the real incomes since people are now able to buy more desired goods for the money they spend.

Bastiat was a master of demonstrating the absurdities in the thinking of those who turned to the state for protection from market rivals, the classic example being his sarcastic essay, “The Petition of the Candlestick Makers.” They insist that they are facing the competition of a rival who produces his alternative form of illumination at a virtually zero cost and gives the product away for free a good part of the day. Who is this competitor? The sun. The only way to protect them from this unfair rival is to request the government to require everyone to shutter their windows closed so the dwellers will have to purchase their candles for light in their homes and places of business. And just think of all the more jobs that would be created!

The Good versus the Bad Economist: The Long Run versus the Short Run View

The hallmark of any clear-thinking economists, therefore, is whether or not they include and carefully weigh the longer-run consequences from various short-run policies that may be advanced.

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate, it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

There is only one difference between a bad economist and a good one; The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet, this difference is tremendous; for it is almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.

Bastiat’s Reputation as the Brilliant Essayist on Behalf of Liberty

As historian of economic thought, Sir Alexander Gray, for example, said that, “No one has ever been quite so skillful in making the case of his antagonist look extremely foolish. Even now his most ephemeral work remains a joy to read, by reason of its wit, its merciless satire and the neatness wsith which he pinks his opponents.”

The French economists, Charles Gide and Charles Rist pointed out that “If modern Protectionists no longer speak of the ‘inundation of a country’ or of an ‘invasion of foreign goods’ . . . we too often forget that all this is due to the small but admirable pamphlets written by Bastiat . . . No one could more scornfully show the laughable inconsistency of tunneling the mountains which divide countries, with a view to facilitating exchange, while at the same time setting up a customs barrier at each end.”

And even though Bastiat’s pen was sharp against the protectionist and collectivist ideas of his time, William Scott emphasized that the French liberal’s “attitude was calm and dignified and in spite of the incisiveness of his criticism he showed appreciation of the motives of his adversaries. He gave them full credit for a desire to promote the well-being of society, but wished simply to show that they were on the wrong path and, if possible, to set them right.”

Those qualities led Joseph A. Schumpeter to call Bastiat “the most brilliant economic journalist who ever lived.” And Ludwig von Mises praised him as a “brilliant stylist, so that the reading of his writings affords a quite genuine pleasure . . . [H]is critique of all protectionist and related tendencies is even today unsurpassed. The protectionists and interventionists have not been able to advance a single word in pertinent and objective rejoinder.”

Almost 170 years have passed since Frédéric Bastiat’s death, but there are few writers on economic topics that remain as readable or relevant to the issues of our own day. Anyone interested in the issues of liberty and prosperity can do no better than discover, or rediscover, the essays of this master of economic insight and wit.