Although he is not credited by many historians of thought as adding any original theory to our body of knowledge although some disagree — he is credited for having put certain theories in understandable language — as well making economics fun to read. Economic Harmonies. While Bastiat was writing in France, Karl Marx was writing Das Kapital , and the socialist notion of "class conflict" that the economic gains of capitalists necessarily came at the expense of workers was becoming popular.
Bastiat's Economic Harmonies explained why the opposite is true - that the interests of mankind are essentially harmonious if they can be cultivated in a free society where government confines its responsibilities to suppressing thieves, murderers, and special-interest groups who seek to use the state as a means of plundering their fellow citizens. In this way, he was also a leader in the ideas of Public Choice theory. His criticism of Smith for his distinction between "productive" labor on material goods and "unproductive" labor in producing immaterial services , Bastiat pointed out that all goods, including material ones, are productive and are valued precisely because they produce immaterial services.
Exchange is the mutually beneficial trade of such services. This built upon Say's insistence that all market resources were "productive", and that income to productive factors were payments for that productivity. Therefore, Bastiat said that "value is measured by services rendered, and that products exchange according to the quality of services stored in them". Here, talking about subjective value as being the reason that people trade and where the value of resources comes from -- the consumer. He continually emphasized that consumption was the goal of economic activity.
His often repeated triad was:. Wants are the goal of economic activity, giving rise to efforts, and eventually yielding satisfactions. Furthermore, he noted that human wants are unlimited, and hierarchically ordered by individuals in their scales of value. So he said, " it is necessary to view economics from the viewpoint of the consumer. All economic phenomena. So his focus on exchange, instead of simply production, was itself a contribution. Capital Theory going along with Economic Harmonies - that markets and capital accumulation are good for everyone, including workers!
How the accumulation of capital results in the betterment of the workers : productivity of labor increases - therefore wages increase. How the accumulation of capital results in the cheaper and better quality consumer goods which also betters workers by increasing real wages :. How the interest on capital declines as it becomes more plentiful: so more workers can become entrepreneurs. Thus, the interests of capitalists and labor are harmonious, not antagonistic , and government interventions into capital markets will impoverish the workers as well as the owners of capital.
Bastiat also explained why in a free market no one can accumulate capital unless he uses it in a way that benefits others, i. Bastiat viewed economics as "the Theory of Exchange" where the desires of market participants "cannot be weighed or measured. Exchange is necessary in order to determine value. Voluntary exchange, therefore, is necessarily mutually advantageous. So to many, this was an important theoretical innovation in the history of economic theory - the understanding that value is created by voluntary exchange, when so many others before him Smith, etc.
Bastiat's greatest contribution to subjective value theory was how he applied the theory in his essay, "What is Seen and What is Not Seen.
Frederic Bastiat (): Between the French and Marginalist Revolutions. - Institut Coppet
A good economist — to Basitat — is one that can point to these unseen parties and to the long term effects of things. If you have been present at this spectacle, certainly you must also have observed that the onlookers, even if there are as many as thirty of them, seem with one accord to offer the unfortunate owner the selfsame consolation: "It's an ill wind that blows nobody some good. Such accidents keep industry going. Everybody has to make a living. What would become of the glaziers if no one ever broke a window?
First-level - common sense. The destruction of property in breaking the window is not good. So people have sympathy for the store owner. Second-level - sophisticated analyst or what Rothbard calls a "proto-Keynesian" analysis. Destruction of property, by compelling spending, therefore stimulates the economy and has an invigorating "multiplier effect" on production and employment.
Third-level - the economist.
Vindicates common sense and refutes the theory of the sophisticated analyst. Thomas Paine. Harvard Classics Volume Thomas Paine Reader. William Godwin. Signs of Change. William Morris. Selections from the Speeches and Writings of Edmund Burke. The Man Versus the State. Herbert Spencer. Works of Pierre-Joseph Proudhon. Marie Louise Berneri. Consolation in the Face of Death.
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Samuel Johnson. Rights Of Man. Jean Jacques Rousseau. Thoughts on the Present Discontents, and Speeches, etc. Progress and Poverty Centenary Edition. Works of Walter Bagehot.
Walter Bagehot. Commentaries on the Laws of England.
Bastiat's Legacy in Economics
Sir William Blackstone. The Collected Works of Karl Marx. An Enquiry Concerning Political Justice. Deontology; or, The Science of Morality. Jeremy Bentham. Ernest Baker. Kurosh Taromi. A Treatise on Political Economy. Antoine Louis Claude Destutt de Tracy. Lenny Flank. Miscellaneous Writings and Speeches Complete.
Baron Thomas Babington Macaulay. Principles of the Civil Code Illustrated. James R. Critics of State Education. George H.
Essays on political economy
History of Prostitution. William W. Adam Ferguson. Eugene Heath. An Essay on the Principle of Population. Thomas Malthus. Lord Macaulay. The Two Narratives of Political Economy.
Nicholas Capaldi. Sexual Equality. Ann P.
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Writings of the Utopian Socialists. The writings of Thomas Paine II. Samuel Taylor Coleridge. Paulding James Kirke.
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