Frederic Bastiat:
The Wittiest Antistatist

Oscar B. Johannsen

[Reprinted from Fragments, July-September 1982]

French intellectuals have rediscovered that amusingly brilliant Frenchman of the early 19th Century, Frederic Bastiat. His two masterpieces, Sophismes Economiques and Harmonies Economiques, are being read with new appreciation, not only because of his wit but because of the profundity of his thought.

In contrast to the usual treatises on economics, Bastiat illustrates his arguments with subtle humor. Sophismes "pulls down," that is, destroys the arguments of protectionists and governmental interventionists. Harmonies, on the other hand, "builds up," that is, demonstrates "the beauty, order and progressive principles of the natural and providential harmonies. "It was Bastiat's attempt to develop a sound system of economic principles predicated on the harmonious relationships existing among men.

It is interesting to compare and contrast the thinking of Bastiat with that of Henry George in three areas of economic thought: value, interest, and rent.

Bastiat and George each advocated a labor-saved theory of value. Bastiat said, "What he [the prospective buyer] is interested in is, not the pains I take, but the pains I spare him." George stated practically the same thing, for he said, "The value of a thing is the amount of labor or work that its possession will save the possessor."

The Austrian School theory of value is probably stated more precisely. Value, say the Austrians, is an ordering of desires. Those desires which one is most anxious to satisfy have a higher priority, or value, in one's eyes. Involved in this is the decreasing order of importance, or marginal utility, of the desires which an article satisfies. A glass of water to quench one's thirst takes priority over one to water a plant. Value, thus, is subjective and not objective, as Karl Marx, for example, claimed.

What is interesting is that the labor-saved theories of Bastiat and George also contain a subjective element inasmuch as they involve an estimate of the labor saved. Estimates are subjective. Likewise, both thinkers apparently had some concept of marginal utility. Bastiat declared, "Value...has a tendency to diminish more and more in relation to the utility to which it is attached." Similarly, George wrote that desire "has a certain scale or order of appearance, in that when the more primitive desires that we call 'wants' or needs' slumber in satisfaction, other desires appear."

George noted that Bastiat argued for the legitimacy of interest as a return for the loan of capital on "the power which exists in the tool to increase the productiveness of labor." George deprecated the productivity theory and, instead, predicated his own theory on "the active power of nature: the principle of growth, of reproduction." He argued that wine increases in value as it ages. It is the time element as well as the reproductive force of nature which, he believed, underlies the legitimacy of interest.

Probably the reason there is so much controversy to this day over interest theories is that there are different definitions of capital. For George, capital was not merely tools, but goods in the process of production. Thus, it is not surprising that he considered interest as fundamentally based on reproduction, because plants and animals mature with the passage of time, with little or no aid from labor. If capital is defined to be a synonym for tools, then the productivity theory will probably be embraced, with interest being recognized as paid out of the increased production. Essentially, this was Bastiat's view.

Regardless of their differences concerning the fundamental basis of interest, both Bastiat and George believed that interest was a legitimate share of the wealth produced and belonged to the capitalist for the loan of his capital.

It was in the area of rent that Bastiat and George differed sharply. Bastiat argued that rent is the fee for the landowners' tilling, draining, and improving the land. Of course, these activities constitute services for which payment is perfectly legitimate. His problem was that he centered his thinking upon agricultural soil, ignoring urban land, mines, air, and water.

Inasmuch as Bastiat believed that the value of land arose from the labor applied to it, he naturally came to the conclusion that "it trees landed property from the slightest taint of injustice." Thus, private ownership of land is justified.

Henry George defined land to include "the whole material universe outside of man himself." Thus, it includes urban land, the seas, and the airways, and is not restricted to agricultural land only. Contrary to Bastiat, George believed that private ownership of land is unjust.

George also recognized that, for maximum production, private ownership of land is not necessary, but rather the private control of land. He reasoned that as all men have equal rights to the land because they are living human beings, justice demands that land be made common property. However, since he was well aware that to declare all land to be common property would arouse tremendous opposition, he sought to accomplish the same end by a round-about method. He recommended the confiscation of rent by taxing the value of the land. The tax would take all the economic rent except a small percentage which the landlord could retain in what amounted to a fee for the collection and distribution of the rent to society.

Probably Bastiat's greatest contribution to libertarian thought was not so much his economic principles as his antistatist philosophy. Some of his most telling blows were against the assumption that the State could correct errors and malfunctions. Instead, he appreciated that, more often than not, the State itself was the problem and that it should get out of the way. As he put it in his inimitable style, "The State is the great fiction by which everybody tries to live at the expense of everybody else."

Present-day libertarians are well justified in looking to Bastiat for substantial backing for their cause since he is easily one of the great libertarian thinkers of western society.