Frédéric Bastiat (1801-50) is known today among economists — if he is known at all — as at best a brilliant polemicist. An economic theorist he most certainly was not — such is the common opinion.
I believe this common opinion to be mistaken. To explain why first requires a discussion of the nature of a theory.
A Theory Is A Story
As I tell students in my Principles of Microeconomics courses, a theory is a story that assists us in making better sense of reality. And a theorist is a storyteller who offers this assistance.
Stories, of course, differ in their believability. A story that explains, say, the Industrial Revolution as being the result of new knowledge imparted to us by aliens from another galaxy is completely unbelievable. Some other, more believable story is called for — one, say, that features a change in people’s attitudes toward commerce and innovation.
But for a story to deserve to be called a theory requires that it also be generalizable.
In economics, supply-and-demand analysis is a general account of how prices are formed and change. It’s not a story about the formation of the price of only one item, such as bread. It’s an outline for telling believable stories about the formation of all prices — from the prices of toy planes to those of jumbo jetliners, from the wages earned by motel maids to those earned by Tom Hanks. A story that explains the price only of bread is not a proper theory of prices, even if it is highly believable.
To be generalizable, a story whose creator wishes it to be regarded as a serious theory must make that story abstract. Being abstract, however, makes the story — standing alone — barren. As such, it engenders no understanding of the physical or social world. But it proves itself to be a good theory if, when relevant details of reality are added to it, those of us who encounter this story go, “Aha! Now I understand reality better than I did before!”
The core purpose of all theories is the creation of improved understanding. A theory that does not cause those who hear or read it to go, “Aha!” is worthless.
Bastiat the Theorist
And so we return to Bastiat. He’s one of history’s most brilliant tellers of economic stories. This fact, I’m convinced, justifies calling Bastiat a great economic theorist.
Consider Bastiat’s famous 1843 “Petition of the Manufacturers of Candles.” In this short essay, Bastiat radiantly conveyed economists’ understanding that artificially contrived scarcities make the general population worse off even if they increase the wealth of a small handful of individuals. Who other than the most benighted protectionist can read Bastiat’s satirical portrayal of sunlight as an unfairly low-priced import and not go, “Aha! Of course inexpensive imports that ‘flood’ into a country no more impoverish that country than does the light sent to us free by the sun!”
Another example is Bastiat’s even-shorter essay “A Negative Railway.” Here Bastiat revealed the flaw in the argument of a gentleman who insisted that if a railroad connecting Paris to Bayonne were forced to have a stop at Bordeaux, the wealth of the French people would be enhanced. The hapless target of Bastiat’s brilliance based his conclusion on the correct observation that forcing trains to stop at Bordeaux would increase the incomes of porters, restaurateurs, and some other people in Bordeaux.
Yet Bastiat didn’t settle for drily noting that, after paying these higher incomes, railways and their passengers would have less money to spend on goods and services offered by suppliers in locations other than Bordeaux. Instead, Bastiat followed the proposal’s logic in a way uniquely revealing: If forcing trains to stop at Bordeaux will increase the total wealth of the people of France, so too will the total wealth of the people of France be increased if trains are obliged to stop also at Angoulême. And if also at Angoulême, then the French will be enriched even further if a third stop is required at Poitiers. And if at Poitiers, then at each and every location between Paris and Bayonne.
Bastiat revealed the proposal to be flawed by showing that, if its logic were sound, the railway that would do most good for the French people is one that is nothing but a series of stops — a negative railway!
A final example of Bastiat’s brilliance is his illustration, in his 1850 paper “What Is Seen and What Is Not Seen,” of the nature of protectionism — protectionism as personified by a fictional French iron monger, Mr. Prohibant. Mr. Prohibant feels abused by his fellow citizens who purchase iron from his Belgian competitors.
“I will take my rifle,” he [Mr. Prohibant] said to himself, “I will put four pistols in my belt, I will fill my cartridge pouch, I will buckle on my sword and, thus equipped, I will go to the border. There, I will kill the first blacksmith, nail-maker, farrier, mechanic or locksmith who comes to do business with them and not with me. That will teach him how to conduct himself properly.”
When he was about to leave, Mr. Prohibant had second thoughts, which mellowed his bellicose ardor somewhat. He said to himself:
“First of all, it is not totally out of the question that my fellow-citizens and enemies, the purchasers of iron, will take this action badly, and instead of letting themselves be killed they will kill me first. Next, even if I marshal all my servants, we cannot guard all the border posts. Finally, this action will cost me a great deal, more than the result is worth.”
Mr. Prohibant was about to resign himself sadly to being merely as free as anyone else when a flash of inspiration shone in his brain.
He remembered that in Paris there was a great law factory. “What is a law?” he asked himself. “It is a measure to which everyone is required to comply once it has been decreed, whether it is good or bad.”
Bastiat explains that Mr. Prohibant then went to Paris to lobby the state to inflict violence upon all French blacksmiths, nail makers, farriers, mechanics, and locksmiths who insist on buying iron from Belgium. In this brilliant example, Bastiat — with his signature sense of humor — revealed the true essence of protectionism.
Applied Theorists Are Theorists Too
Some people will object to my calling Bastiat an economic theorist. They’ll point out that he did not devise any theories that are new — that the truths that Bastiat so clearly revealed were already known to professional economists.
Let’s grant here that Bastiat invented no original theories. (This concession is likely contrary to fact. David Hart of Liberty Fund and, separately, GMU econ student Jon Murphy are each working on projects that will show that Bastiat did indeed have original theoretical insights.) Even if Bastiat has to his credit no original theories, we economists have long, and rightly, celebrated the work of those whom we call applied theorists.
Applied theorists apply existing abstract theories to real-world situations. In doing so, these theorists enhance our understanding of reality. The stories they tell cause us to go, “Aha!”
I submit that Bastiat ranks, at the very least, among the greatest of all applied economic theorists. His work should be more widely known; it deserves much greater professional respect.