Taxes,Policies and the Economics of Frederic Bastiat

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Taxes,Policies and the Economics of Frederic Bastiat
Pradeep Banerjee, Management Consultant Bangalore 3/1/2011 1:57:55 AM

Taxes are part of fiscal policies initiated by the State as part of its governing activities. Taxes are not new to the world of economy and have been there for a long time now initiated as these are by the various forms of State that have been ruling societies. Taxation as part of State policies have not been restricted to the emergence of the modern state as has evolved over the last few centuries albeit it is in this form that interest us here. Taxes are characterized by their ubiquity. It is not surprising, therefore, that these formats as policy outputs of the State have attracted attention of those who have reviewed them to arrive at their contents and their rationale in terms of applicability to the given society at the time these were introduced. In one aspect taxes retain a specific quality that has not changed over the many years that these have been imposed. Taxes continue to remain as the parting of moneys from the citizenry to the state. The format has evoked comments that have included viewing the impact essentially restricted to the event related to payment of taxes, and probably made evidently famous by Benjamin Franklin who observed that taxes and death are the only two certainties in the life of a citizen. Franklin did, however, give the primacy of place to death. If these views became famous for their succinctness, there were others that came to be justly noted for their elaborateness. These included responses from commentators who viewed the process of taxation in its entirety and included in their observations much more than pithy observations. In a manner of speaking, such views were advanced to lay down an understanding of the cycle that included the methods of the State, actions by the State, implications for the citizenry, responses of the people, and responses of the State. The views extended by these commentators were certainly holistic. These outputs are not historical footnotes confined to certain points in time alone; there are lessons to be learnt from them by statesmen, the bureaucracy, and citizens. That remains so, for while times have changed from then to now the constancy of taxes have not. Taxes, however, are not independent artifacts; they are clearly a part of the political economy of the land, and are enmeshed with economic policies that are part of this economy. To get a picture of the way tax interventions originate and work out as measures, these have to be viewed as but a part of the economic system.

Frederic Bastiat — Arriving at a Format to View Matters Economic in Society
One commentator on matters economic, and which included the issue of taxes, was Claude Frederic Bastiat, a Frenchman of the early nineteenth century. He is relevant here for he stepped out to make his comments and studies available in the format that was referred to earlier; he specified that it requires the inclusion of the ‘full picture’ to arrive at economic policy decisions. The emphasis, then, was on the holistic status, and not on the short picture concerned as it is only when the concern is about immediate consequences. It is interesting to note that while Bastiat has been seen by some as an economic journalist and not as a theoretician, and hence as one who would be associated with the short picture, there are others who quiet steadfastly decline this as the due expression. Bastiat wrote for the French Journal Journal des Economistes, an academic journal on political economy that started being published from 1841 and continued well up to the Second World War when its publication was stopped by the invading army.1 The Journal had published contributions by Leon Walrus and Vilfredo Pareto, economists who continue to remain well known and well read till date. It was Schumpeter who in his History of Economic Analysis did raise the issue of Bastiat as an economic theorist, and wrote that, ‘I do not hold that Bastiat was a bad theorist. I hold that he was no theorist.’2 Hazlitt3, however, contends that this is not a true assessment of the contributions of the man who was, ‘an economic pamphleteer, the greatest exposer of economic fallacies’. To counter the observation of Schumpeter, Hazlitt draws out the formers observations about Economic Harmonies, the book that Bastiat wrote. Schumpeter readily agreed that had Bastiat not written the book, ‘his name might have gone down to posterity as the most brilliant economic journalist who ever lived.’4 Hazlitt quiet clearly has his views the support of Hayek who wrote that, ‘One might even grant Schumpeter's harsh assessment of Bastiat that "he was not a theorist" without seriously diminishing his stature.’5 We might as well agree with these effective assessments of the man who crafted the pamphlet into a document that had the barb and the wit when it brought out in open matters that were economic in content and public in value. If the understanding of such matters were connected with the practical wisdom that is gained from a life associated as such, Bastiat did undergo such experiences. His was a short life, and in this compressed tenure it was only during the last decade and half of his life that the writer on matters economic communicated to his readers his analysis of such matters.

Bastiat was born in 1801 in Bayonne, a provincial town in southwestern France close to the border with Spain. Orphaned at an early age, Bastiat left school at the age of seventeen to work in the business that his family was involved in. It is while working in the exports business that Bastiat came into learning first hand the impact protectionism had on trade between nations. It is the experience of negative aspects recorded in states of decline in trade, empty warehouses that were a fall out of such declines, increase in unemployment and in poverty, and downward trends in city population, that DiLorenzo6 points out were the lessons the young Bastiat learnt of misdirected trade policies aimed at upholding protectionism. Bastiat wrote about this in his later life when he opted for a change in life activities. He came to acquire an estate that his grandfather looked after at Mugron, some distance away from Bayonne. Bastiat moved on to become a scholar with an interest in matters economic and the politics of the day. It helped that France had an established school of scholars who had written about the relevance of agriculture as a provider of the wealth of a nation. The economic theory that this group of writers aggregated under the Physiocracy school predated the classical era that started with Adam Smith. The Tableau économique, published in 1758 was authored by Francois Quesnay and was a structured format of the manner in which the agrarian economy was looked at. The influence could be there, for Bastiat formulated his approach to agriculture and attempted to implement scientific agrarian methods among farm land owners at Mugron. After all, the Tableau économique was instructive about distribution of the produce of the land among people, and it also served a lesson that prompted increase in the produce too. The steps did not quiet yield the results that were targeted and Bastiat made recourse back to that which he favoured most. It was to be a quiet life of scholastic activities for the young man of twenty five. The lessons that the physiocrats provided were not, however, forgotten and their influence can be considered to have been of value to the young scholar.7

At the age of nineteen, two years after he had left his school to enter a trade, Bastiat had expressed his ambition as a scholar and what would he look forward to. He wanted to be fully conversant with ‘nothing less than to become acquainted with politics, history, geography, mathematics, mechanics, natural history, botany, and four or five languages.’8 The newly settled gentleman farmer looking after the estate left behind by his grandfather had, not many years later, the chance of becoming one. Bastiat wrote, and contributed to publication, his observations about the political economy. A number of major events of the time had set into motion the expression of people of the land asking for change. The Revolution of 1789 was a cause that brought in changes of significant magnitude. The coming of the French First Republic from 1792 to 1804, the succeeding Napoleon years, the July Revolution of 1830, the February Revolution of 1848, and the installation of the French Second Republic in 1848 were peak level events that did bring in notable turmoil, dissensions between classes, unemployment, food riots, and uproar for political power and representation in the society of the day. Bastiat was a witness to most of these except for the Revolution of 1789, and so impacting were the effect of events of that period that no person with interests of the type that Bastiat had would be immune to the effects. It was not just the changes that were happening in France that would have an impact. The growing interaction between nations effectively meant inclusion in terms of reckoning of all that which was happening elsewhere into the framework of current concern too. Bastiat struck a friendship with Richard Cobden who spearheaded the Anti-Corn League set up in 1836 in London. The purpose of the League was to nullify the import tariffs placed by the Corn Law in 1815 on import of corn to United Kingdom and Ireland. Richard Cobden was a supporter of non-protectionist policies, an area of concern that had influenced Bastiat from his Bayonne days. It was a dedicated study of the impact of protectionism policies followed by the two countries France and Britain on their respective countries that Bastiat followed with great interest. The rapidly gathering influence of Cobden in the Manchester political establishment meant that Cobden was heard, and more so that his stand on tariffs and protectionism were debated about. Bastiat, then an unknown author, sent his notes on ‘The Influence of French and English Tariffs on the Future of the Two Peoples’ for publication to the Journal des Économistes.9, 10 Roche11 points out that the ‘editors examined this article by an unknown author from the provinces and realized that they had discovered a brilliant new economic thinker with a fresh analysis of the problems plaguing French society.’ The article was published in October 1844, and the writer who found it difficult till then to come across a publisher for his writings found ready publishers and readers. The first volume of essays was released in 1845 under the name Economic Sophisms. This was followed by Economic Harmonies in 1850 and this volume contained his approach to the area of political economy. There were other works of import, and these include the text The Law (1850), Cobden and the League (1845), and Capital and Rent (1849).

Convening the Practice of the Science of Political Economy
It was not that Bastiat did not find detractors who viewed it as a measure of complaint against someone who agreed with the approach of an Englishman as regards protectionism and who also alluded thereby to the pro-English opinion in the process. This during a period of hostility between the two nations was not an easy force to reckon with. Roche points out that those detractors not only fuelled the charge that the adoption of ideas proposed by Bastiat would lead to ‘unemployment and starvation for the working classes’, they also went to the extent where ‘Every half-truth and non-truth imaginable was trotted out by opponents of free trade.’12 The response of Bastiat was to offer the written word with simplicity of style that could render the thought comprehensible to the reader. The essays that were included in Economic Sophism were true to this style. The writer who probably enjoyed the idyll circumstances of Mugron was drafted as a lead member of men who prompted re-examination of free trade policies. Confirmed on the position taken by Bastiat as regards application of tariffs, a trade association of Bordeaux sought his help to write for them as part of a campaign that was hoisted by the association members. Here was an offer that permitted the mix of writing as a mode and working on economic policy construction as an objective, and Bastiat embarked on the task with willful alacrity. The Bordeaux Association for Free Trade came into being in 1846. In such events there were lessons that were not lost on Bastiat. These lessons were to do with the choice that he had to execute in terms of interventions that he as a writer, as a commentator on matters of political economy, and as a doer had to contend with. It is interesting that the writer in him brought this out, and did so not just in a manner that was limited to read as a note to him alone but also for his readers who could understand the reasons that he endorsed, sympathize with the man and his thinking, and besides marvel at the approach of the person. In the preface to Economic Harmonies, a note that he added in 1847, Bastiat writes to himself addressing the note starting with the expression ‘My dear Frédéric’, and adding, ‘Frédéric, it is our custom to speak to each other with complete candor. Well! I must say that I'm amazed at your decision.’13 The decision was that of moving to Paris to be in the thick of actions, and away from the self-imposed isolation of the estate at Mugron. And while the writer in the second person agrees it ‘not due to the promptings of vanity that you have turned your steps toward Paris’, the issue remains as to ‘what did induce you to go? Was it a desire to do something for mankind?’, and the balance of the note dwells lengthily on ‘I have a few remarks to make to you on that score.’14 What follows is a remarkable note on clarification of the writer on matters economic and political, and the course of action that Bastiat took during this part of his life. His self scrutiny was deep and his response poised. Consider the scrutiny that he asks of himself as to why does he pursue indefatigably that what Jean-Baptiste Say and Adam Smith had elaborated so many a time, and with so much of erudition. ‘Here you are’, he asks of himself, ‘analyzing, defining, making your calculations and your distinctions, and, scalpel in hand, trying to cut through to find out just what, in the last analysis, is the exact meaning of the terms price, value, utility, low cost, high cost, imports, exports.’15 This is an admonishment, and the way forward is the suggestion that takes into account the very fabric of human life in society. The theorization has been done by people better than him, and the need was to recognize the limitation of his activity that is restricted to renderings of people in the abstract. As a reminder to correct his pursuit, there is a need to ask that, ‘if you do not fear dulling your mind at such a task, do you think that, for the sake of the cause, you have chosen the best course to follow?’ There is a need to recognize that the ‘peoples of the world are not governed by algebraic x's, but by noble instincts, sentiments, common sympathies.’16 And following this, ‘What you needed to give them was a picture of the successive falling away of the barriers that divide men into mutually hostile communities, jealous provinces, warring nations.’17 There was a requirement to bring people together, to show the triumph of reason and the relevance of progressive institutions over despotic regimes. It is clear, the writer in the second person tells Bastiat that, ‘These are the things that would have set the hearts of the masses afire, not your dry demonstrations.’18 To do so, and be successful at it, was to be the desired calling. At the end of the note, the writer is told that it was in the fitness of things that the migration to Paris was called for. The questioning end with an appeal and it is as to ‘why restrict yourself?’ And since ‘Your burning desire was for parliamentary reform and for the thoroughgoing separation of the delegating and controlling powers from the executive powers in all these branches’19, the way forward was clear. There was little point in approaching these aspects in a routine manner wherein the concern was a piece by piece analysis. What indeed could be resolved by doing so? The writer in the second person pointed out that, ‘you are acting like a mechanic who is taking the utmost pains to explain an isolated piece of machinery down to its most minute detail, omitting nothing. One is tempted to cry out: "Show me the other pieces; make them move together; the action of one is explained by the action of all the others."20 The migration to Paris was a sequel to this development.

Bastiat, the thinker, and the writer, in search of answers to questions in political economy, had made up his mind that the culmination of activities were tied to single minded pursuit of participation in the societal processes that were enfolding in the France of the day. Bastiat stood for elections to the National Assembly from his district of Landes as the Second French Republic was being formed in 1848. A member of the Committee of Finance, Bastiat had the scope of arguing out his approach, and he did so in a manner that he had written in his essays that were a part of Economic Sophism. The arguments were directed to break the stranglehold that opinions that do not stand to inquiry of any kind and yet gets translated into firmer options that were opted for. Bastiat wrote that opinions, ‘if only it happens to coincide to some slight degree with prevailing attitudes and passions, it becomes a self-evident truth.’21 In the hands of the demagogue, this was an opportunity to good to be passed over. At the receiving end, however, of such ill formed opinions converted into economic policies, were the citizenry, and Bastiat brought out his best in providing economic logic to redeem the status. It is not for nothing that he chose the term sophism to describe the status. Bastiat created continuity in reaching out to readers his studied responses to contents of policies that he recognized as ill advised ones. He did so more effectively when he assumed editorship of the journal Le libre-echange, the first issue of which came out in November 1846. The journal was an opening for many of the observations that he made about prevailing economic issues. The satiric paper that he wrote against protectionism, and named it Petition of the Candlemakers, is an illustration of his barbed wit that he used to make his point. Petition of the Candlemakers remains well known till date, and is an apt piece that explains the thinking of the man who went for the core of the issue and nailed as sophism the inadequately articulated, both in thought and letter, the outpourings of groups that sought protection for benefits to them alone. The candle makers request that they be protected against the other provider of light such that they can consolidate, and such that the economy of France is helped. Protecting the candle makers against the other provider of light would mean a fillip to many an industry. Cut off the supply of light made by the other supplier, and the populace would consume more tallow. This would mean an increase in cattle population and an increase in land availability for land would stand to be cleared and additional crops would be grown in these lands. The increase in consumption of oil would mean an enhanced production of seeds that give oil as an output. It would lead to an increase in whaling, and the consequent growth of the shipping industry. It would not be long before this growth would enhance maritime resource availability for the nation. In a sense, the combined growth would envelop all of the countrymen and that would mean a benefit for the nation and its economy. The petition, in the essay, was made in all earnestness by ‘Manufacturers of Candles, Waxlights, Lamps, Candlelights, Street Lamps, Snuffers, Extinguishers, and the producers of Oil, Tallow, Resin, Alcohol, and Generally of Everything Connected with Lighting’ to ‘Members of the Chamber of Deputies’. The issue was as to who was the alternate supplier of light that the group was against. It is best to quote Bastiat himself to appreciate the wit and the force of his argument. Bastiat writes, ‘We are suffering from the intolerable competition of a foreign rival, placed, it would seem, in a condition so far superior to ours for the production of light that he absolutely inundates our national market with it at a price fabulously reduced. The moment he shows himself our trade leaves us — all consumers apply to him; and a branch of native industry, having countless ramifications, is all at once rendered completely stagnant. This rival, who is no other than the sun, wages war mercilessly against us, and we suspect that he has been raised up by perfidious Albion [England] (good policy nowadays); inasmuch as he displays toward that haughty island a circumspection with which he dispenses in our case.’22

Bastiat came to be recognized as one who could lay down his arguments on political economic issues with remarkable clarity. This was acknowledged, and was done so even by those who were opposed to his approach to matters economic. It is interesting to note that this was also stated as was done so by a Parisian newspaper that went ahead to write that, ‘The doctrines of the writer-economist are not our own. But we must admit that he has posed this question with all the clarity of a practical man, and that he has offered, in support of his amendment, reasons of extreme gravity, which have made a profound impression in the Assembly.’23 The role of Bastiat at the Assembly was recognized as an important one. The only shortcoming was that Bastiat did not stay a part of the Assembly for long after he had joined the body.

Economic Harmony and Economic Policies
Taxes and taxation policies are outputs of state interventions in the economy. These are not isolated events that can be seen as such but from a theory point of view have to be situated in a construct that is specific to that theory. Bastiat had outlined his theoretical approach in his book that bears the same name as the core of the approach. Economic Harmonies, the text published by Bastiat, and considered his magnum opus by many, provides the gist of his approach to his study of economics when situated in the societal construct. ‘It is in this book’, Hulsman24 observes, ‘that he develops and defends the thesis that the interests of all members of society are harmonious if and insofar as private property rights are respected or, in modern parlance, that the unhampered market can operate independent of government intervention.’ The market can be expected to satisfy the requirements of the populace except the interests of those whose interests are in seeking the property that rightfully belong to others. The issue of importance is not as to whether the members of a society operate in harmony; the issue is one of as to whether the respective interests of these members are in harmony with those of others. And as to what this harmony achieves for society, the same is explained by stating that it is on account of this harmony that the ‘level of humanity’ rises to better heights. In effect, then, Bastiat points out that, ‘If the social tendency is not a constant approximation of all men toward this progressive elevation, the economic laws are not harmonious’.25 Elsewhere, he adds that ‘all legitimate interests are in harmony. That is the predominant idea of my work, and it is impossible not to recognize its importance.’26 It is in this contextual format that activities of production and consumption are carried out in an economy. This is the answer that Bastiat provides for the question that he raises when he asks, ‘Are human interests, when left to themselves, antagonistic or harmonious?’27 The question was posited in the context that there were schools of approach to political economy that viewed these interests as antagonistic. Taking example of such deemed antagonistic relationships as say between such dyads as ‘proprietor and the proletarian’, ‘capital and labor’, ‘agriculture and manufactures’, ‘rustic and the burgess’, and ‘producer and the consumer’, among others, Bastiat points out that the window of antagonism is a constructed one, and one that is constructed simply because these authors ‘judge the natural organization of society bad or insufficient’. And they do so, Bastiat continues, since ‘they think they see in men’s interests a radical antagonism’. The proposal to rule out this thinking which hinges on antagonism between human beings is one that views self-interest in a manner that explains as to why human beings engage in exchange of goods and services. It is in this context that Bastiat provides what he terms as a ‘fundamental principle’, and which is that ‘interests, left to themselves, tend to harmonious combinations, and to the progressive preponderance of the general good.’28 It is for seeking self-interest that goods and services are offered and exchanged. When an individual seeks value, he does so for himself and in the process renders to the other the same. The other individual does it for the same purpose. The critical issue is the way self-interest is looked at. Self-interest, then, ‘is the great mainspring of human nature. It must be perfectly understood, however, that this term is here employed as the expression of a universal fact, incontestable, and resulting from the organization of man — and not of a critical judgment on his conduct and actions, as if, instead of it, we should employ the word selfishness.’29 Looked at in this manner, it is in similar lines of formatting that Adam Smith wrote about when he reasoned as to why a baker, a brewer, and a butcher carry out their activities when they do so. The issue of division of labour in society was integral to the approach. It is, then, that the self-interest of individuals that was expected to retain, and also build up on harmony in society such that at a point in time this build-up of harmonies achieved in production and exchange of both goods and services does augment a progressive enhancement of the ‘level of humanity’ in society. Bastiat also wrote that he did not expect the complete absence of dissonance in the sphere of harmony in the economic world. To concede that the system was devoid of ‘error and vice’ was to read the message incorrectly. To deduce the obviousness of such a system is to state that humans who populate such a world are themselves bereft of free will, or that they are flawless. These assumptions are not tenable. The issue then becomes as to why does harmony prevail despite the presence of factors of dissonance. The explanation provided is that, ‘All we say is this, that the great social tendencies are harmonious, inasmuch as — all error leading to deception and all vice to chastisement — the dissonances have a continual tendency to disappear.’30 It is in this framework that Bastiat sees a role of the government.

State, Policies and Taxation
The idea of government that is proffered by Bastiat is based on a concept that starts with the fundamental premise of life and living itself, and on which the concept of law is affixed such that there can be organized a dissonance free conduct of life and living. Life is a gift that each individual gets and to maintain this gift, the individual uses the faculties that he has and which he uses to work on resources, including natural resources, that he converts to be of use to himself and others. In one stroke, Bastiat combines these three to write that, ‘Life, faculties, production — in other words, individuality, liberty, property — this is man.’31 All else follow from this premise. Laws are made by men to endear to this premise. As a consequence, then, it becomes the natural right for an individual that he defends his person, his liberty, and his property in order to preserve his life. And likewise do all individuals in a community who have the ‘right to organize and support a common force to protect these rights constantly.’32 The collective right is for all intents and purposes an outcome of the individual right, and this collective right has no other purpose than that instilled in this construct. Following this, it is prescribed that no individual or a collective group act adversely to the rights of other individuals for that would be an unlawful act and a miscarriage of justice. It is based on this viewpoint that Bastiat provides an operational definition of law. He writes, therefore, that the ‘law is the organization of the natural right of lawful defense. It is the substitution of a common force for individual forces. And this common force is to do only what the individual forces have a natural and lawful right to do: to protect persons, liberties, and properties; to maintain the right of each, and to cause justice to reign over us all.’ He also attends to the issue in a manner that brings forth the aspect of injustice. Bastiat writes that, ‘I do not hesitate to answer: Law is the common force organized to act as an obstacle to injustice. In short, law is justice.’33 This point is as well put as an answer to the question that he raises in the context of legislations and legislators who pursue the activities of legislating. The question that he raises is ‘Logically, at what point do the just powers of the legislator stop?’34 So defined, the positioning of what a government is about becomes a call for upholding this concept and practice of law. To carry out activities that foster securing rights of individuals, then, Bastiat agrees that the minimal amount that is required to maintain equal protection is to be augured by measures including those that involve taxation of the populace among others.35 In case the State opts for measures that are beyond these restrictions, the impact on the society turns out to be negative.

In a contribution that is included in Selected Essays on Political Economy, Bastiat turns his attention to the idea of State, the body that is at the pinnacle of the administrative concept behind the political economy of a nation. These essays are written in the manner adopted for those written in Economic Sophism. The manner and style which has been identified as befitting the best in economic journalism, Bastiat puts forth the issues as questions and proceeds to answer these questions with wit and sarcasm that is biting. The objective probably was to get hold of the reader’s attention right from the start. Consider the first sentence that he begins his essay on the State with. Bastiat writes that, ‘I wish that someone would offer a prize, not of five hundred francs, but of a million, with crosses, crowns, and ribbons, to whoever would give a good, simple, and intelligible definition of this term: the state.’36 The questions then are brought into the essay in numbers, for he writes, ‘The state! What is it? Where is it? What does it do? What should it do?’37 The answer is as attention grabbing too for Bastiat writes that, ‘All that we know about it is that it is a mysterious personage, and certainly the most solicited, the most tormented, the busiest, the most advised, the most blamed, the most invoked, and the most provoked in the world.’38 It is a body that one expects would ‘cure all the ills of mankind’ and as regards what is expected of the State even a short list includes such diverse activities as ‘Organize labor and the workers’, ‘Repress the insolence and tyranny of capital’, ‘Furrow the countryside with railroads’, ‘Irrigate the plains’, ‘Plant forests on the mountains’, ‘Establish harmonious workshops’, ‘Equalize the profits of all industries’, ‘Encourage art; train musicians and dancers’, ‘Restrict trade, and at the same time create a merchant marine’, and even to ‘Discover truth and knock a bit of sense into our heads.’39 The demands are many, and so are the tasks. And how does the State respond to this massive task of pleasing all segments for would it not be deemed to be a failed one if it does not succeed in placating these demands. In characteristic manner, Bastiat says he too would like to have this inexhaustible source of wealth as a resort of immediate measure. It is to this that he directs attention to and points out the folly in thinking that an external body can redeem humans of the pain that one has to go through when called upon for committing and carrying out work for a living. He can, however, escape this drudgery, if he can find the means whereby he can ‘enjoy the fruits of other men's labor’. This was the reason behind the slave economy in some lands. But if there is distaste for workings of a slave economy, and of those who benefit from oppression endemic to that economy, the charge that it was absurd can unlikely be attributed to it. The format in which it is continued in a reduced favour of direct exploitation is to appeal to an intermediary to facilitate a transfer of benefit from someone who labours to those others who have not laboured to get that benefit to which they lay their claim to. The intermediate structure, Bastiat points out, is the State. In a distinguishing way, and for which reason he earned the sobriquet of an economic journalist of the finest kind, Bastiat writes that, ‘What is better fitted to silence our scruples and — what is perhaps considered even more important — to overcome all resistance? Hence, all of us, with whatever claim, under one pretext or another, address the state. We say to it: ‘I do not find that there is a satisfactory proportion between my enjoyments and my labor. I should like very much to take a little from the property of others to establish the desired equilibrium. But that is dangerous. Could you not make it a little easier?’40 This done, and if carried out, works as a salve to the conscience too of the requester for then the State is on the side of the requesting agency for carrying out the request. Yet given the reality of handling economic issues, the State can do no better than give with one hand what it takes with the other. The State, Bastiat informs his readers, is not a one-handed body that can continue operating in an unending act of charitable giving. It is, therefore, fallacious to think of a personified State that can work in this manner. The activity of taxation that the State goes in for is an outcome of having to retain at a minimal level that ensures harmony of the type envisaged in a just society. On the other hand an avalanche of many a tax is the upshot where interests succeed in their requests to the State to make it a little easier such that they benefit from the act. Bastiat in his writings on taxes, and tax gatherers, wrote not about the minimal amount that is required for maintenance of a society in harmony. He wrote instead on the excesses that were done in the name of governance. And while being a legislator himself, and thereby a part of the team responsible for governance, he wrote of the dangers of demagoguery that was so often practiced.

A precursor to looking at the approach that Bastiat adopted when writing on the area of taxation and tax gatherers, is his writing on what can best be expressed by referring to the terms he employed. The essay, or the pamphlet, That Which Is Seen and That Which Is Not Seen, was published in 1850, the year Bastiat succumbed to tuberculosis that he was suffering from. This essay is considered as one that is of high significance and not just as a framework essay which defines his approach to many an area that he worked on. It is considered as relevant to discourses in current day economics too. About the essay, Roche points out that, ‘Here, in a brilliant flash of insight, Bastiat put his finger upon one of the prime fallacies in economic thinking which still haunts the modern world.’41 In the economic arena, the initiate of an action, whether by a law or by an institution, leads to indeed a series of consequent effects. Of these series of effects, it is only the immediate effect that is observable along with the cause of the effect, the rest of the effects remaining unseen then. Bastiat identifies the first of the effects, and the cause, and recognizes these as ‘That which is seen’. Those other effects that materialize latter are classified as ‘That which is not seen’. In a social context, the implications of these two categories are large for it almost always happens that while the consequence of the former are encouraging, it is those of the later that are grievous. It follows, then, that economic policies need to be assessed on the touchstone of both short run effects, and those of the long run category. Bastiat relates this to the practice of economic policy making, and he does so by bringing to the fore stating that, ‘Between a good and a bad economist this constitutes the whole difference — the one takes account of the visible effect; the other takes account both of the effects which are seen and also of those which it is necessary to foresee.’ The former policy maker is content with the immediate effects, and which may be driven by interests that are narrow and obdurate, and at a cost to the many. It is the later category that needs building up. The positioning of taxes as part of policy making proposed by Bastiat requires to be viewed, then, in the context of ‘that which is seen and that which is not’. Articulated sophisms can get easily couched in a format that covets the immediate and deems the long run inessential. Bastiat presents his take on taxation on this premise.

While there are references to matters related to taxation, there are some that takes up the matter singularly, while there are others such as the approach to analyze protectionism and the association of this policy with what is recognized as indirect taxes, tariff as taxes being a case in point. The issue of protectionism referred to earlier, was one of the main areas of concern and dedicated writing by Bastiat. It was an area that he had an immediacy of reason to work on having seen its effects at the first hand level. And if the note on petition by candle makers included his observations suffused with acerbic wit and scorn for indulgence by those whom he identified as working for selective benefits at expense of others, the notes on direct taxation on producers in the economy did not loose this approach either. There is, however, an attempt at drawing out lessons from his other essays, when the issue is of specific nature. The essay entitled The Broken Window is an effective example of this approach for it draws heavily from the earlier essay on the essence covered in That Which Is Seen and That Which Is Not Seen. In this essay, Bastiat attempts at proving the incursion of economic fallacy in the response of people to an event where a boy breaks the glass of a window pane of a shop, an event of commonplace occurrence in daily lives. Once the short drama associated with such events has passed away, people reason that the breaking of the glass would eventually lead to the purchase of replacement glass from a glass seller, thereby bringing in an earning to the later. The glass seller would in turn enrich other suppliers connected with the manufacture of glass, and that of supply of ingredients connected with such manufacture. The chain of benefit would cover many a producer and seller and the process of enrichment would be assessed as beneficial to the economy. The prank should therefore be thanked for helping create the chain effect that distributes benefits. To the hapless shopkeeper, John Q. Citizen, Bastiat continues, the gathered public would all say, ‘Everybody must live, and what would become of the glaziers if panes of glass were never broken?’42 Bastiat compliments this part of the thinking, and states that this part is but the part ‘that is seen’. What remains is the part ‘that is not seen’. The shopkeeper had the plan to spend the money on purchase of shoes, or some other trade item. This is the part ‘that is not seen’, and had he been able to do so, his ‘enjoyment’ would have been that of a glass pane and a pair of shoes. Drawing allusion to John Q. Citizen and substituting it by the common society instead, it becomes clear that society has lost in such instances. To look at the immediate and easily visible effects is a short term construct; there is a need to keep those that are not easily visible in the focus too. Nothing new has been created in the approach that has been favoured in the instance of The Broken Window. The useless destruction of something followed by a proposal to respond to the destruction, has at best retained equivalence between what would get created in place of that what has been destroyed, the loss remaining unseen in the process. Bastiat, for this reason, asks for review of such legislations that focus on the short term alone, and reminds his readers that he does so given that it is often that the emphasis on legislations is on the visible and that against the unseen. The proposal to legislators, as regards legislations on taxation, then, is ‘to begin them again, by taking into account that which is not seen, and placing alongside of that which is seen.’43 The shortcoming of this usually preferred approach is a failure to identify that the approach does not take into account an important imperative, and which is that of accounting for optional use of the resource that has been exhausted. A society, and its economics, needs to include this in its approach. It requires to recognize the futility of the approach when they ‘favor fruitless public works projects to “create jobs”, not realizing that the taxes that fund these projects destroy as many jobs as they create.’44 Ebeling,45 in this perspective, points out that as regards the matter of taxes, Bastiat applied effectively the principle of the seen and the unseen that he had elaborated upon earlier. The construction of canals and roadways and the associated employment made available out of taxes collected are the ‘seen’ part. The ‘unseen’ part is that what would have emerged had the tax money collected remained with private citizens, and the labour that had been employed was free for employment by these citizens. For all intents and purposes, then, Bastiat was elaborating on the role of the State and its proposals on matters economic when it uses the measure of taxes to effect changes. These moves, unless carried out with keeping the short and the long terms in view could lead to less than effective aftereffects.

The essay on The Tax Gatherer, elaborates the manner in which attempts at convincing the citizen to part with his earnings in the form of taxes are made. It is in the format of a dialogue between one Jacques Bonhomme, a wine maker, and Lascouche, a tax gatherer, and one that is conducted when the later visits the former for a share of the part of the produce the former has made during the season. As part of the volume on Economic Sophism, the pattern adopted for the essay is a familiar one. The asking rate of tax is about a third of the produce, and to part with six tuns of wine casks of the twenty that has been produced is too steep a proportion the private citizen is prepared to pay. He has but one point of view, and he puts in saying, ‘Six tuns out of twenty! Good Heaven! you are going to ruin me. And please, Sir, for what purpose do you intend them?’46 The tax gatherer puts forth the reasons for the quantum proposed to be collected, and includes this as towards payment of costs incurred for running the country. These include payment of interest on debts secured, payment for public services delivered, payments for policing such that property is safe from roving desires, payments for schoolmasters who educate the children of the citizens, payment for expenses of the army and the navy, payments for running colonies, payments for external conquest, payments for subsidizing the manufacturers who have suffered losses in their ventures, and so on with the list getting larger and larger. The tax gatherer, at the end of the dialogue, adds that the reasons and the quantum of tax is what have been determined by the legislator who Jacques Bonhomme has himself voted as his representative to determine policies to be put forward and carried out by the State.

If the ill fated Jacques Bonhomme is what is made out of him in the essay on The Tax G, Bastiat writes about the manner in which the State should make use of taxation as a policy. He does this in yet another essay entitled, Our Products burdened by Taxes. Bastiat was not per se critical of taxes, and while he favoured a minimum to ensure conditions necessary for harmony, he made a distinction between the correct use of taxes that were gathered and their incorrect use in terms of rendering value returns to the citizens. On return of services to the public that are of the same value, the State can be recognized as having acted in the interest of the citizens. The reverse is the case when the State fritters away revenues and is unable thereof to render equivalence of value that it ought to deliver. In essence, then, Bastiat concludes that the ‘State may make a good or a bad use of the taxes it levies’.47 He adds that, taxes that are levied require to be ‘more just, more economical, and more honorable’. By being more just, he means that in such cases where society deems it correct to transfer an amount to certain members of a trade, such as an amount to be transferred for iron based industries that require the support being a fledgling industry, the same should be contributed by all members of the society. It would turn out to be more economical, for it would save on expenses on collection of taxes in this case. And as regards to be honorable, this is important ‘because the public would then see clearly the nature of the operation, and act accordingly.’48 Bastiat was quiet clearly against the introduction of taxes that were claimed to lead to building up of the nation on the hand, and also adding in by taxes that were made to subsidize specific industries when these industries were covered under protection too. Doing so would be neither just, nor economical, and finally it would not be honorable to do so. Bastiat was not an anti-tax crusader; he was inimical to sophisms that got masqueraded as logical constructs of political economy.

Frederic Bastiat and His Views on Political Economy, Policies and Taxation
Bastiat and the study of his writings make for some interesting learning. The slate that Bastiat was using was a large one. His referral coordinates indicates that he was talking of the economic system and not just a part of it. It was also about a country that was passing through quick engulfing periods of what can be seen from a distance of time as those of social experimentation. In the days of occurrence nevertheless these events would have been extremely trying, and at times combative with established patterns of thinking and analysis. It took the intellect of Bastiat to put down in easy readable terms the contents that drove changes made in the economy by way of policy measures and the manner that these had to be analyzed and understood. What he wrote about bad economists has probably a larger implication. A bad economist was one who was contended to talk about the immediate and the visible. The shortcoming of ignoring long term implications was disregarded by that group of economists. It was, however, the good economist who directed the analysis to ascertain the long term implications. This is a lesson that helps in understanding the reasons why Bastiat continues to be read and as also why Bastiat should continue to be read. Like any good economist, he picked out processes that populate the world of political economy, and offered the reader the wherewithal to understand these processes. Hazlitt observes that, ‘From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.’49

The issue probably is not so much about economic journalism or economic theorizing that can be called upon to assess the contributions of Bastiat. If it is true that his theory on value may be less appealing to practitioners of today50, it is as true that early contributions to economic thought can be traced to Bastiat,51 as also how the approach differed from those proposed by Smith and Ricardo.52 There have been critical examinations of the approaches that have been built up following certain leads that were offered by Bastiat and those that followed him. The hardening of the laissez faire position in economic affairs where governmental involvement is expected to be a restricted one is one such development.53 There could be certain validity of this approach inasmuch as later day economists working on lines of the Austrian School have attempted to establish theoretical approaches. That has to be taken into account. It is, however, probable that there could be an element of over reading the original contribution keeping present day conditions as a frame of reference. This is so when longitudinal inferences are drawn pending significant provisions for inclusion of much that has happened since the days that were being referred to at the start. It is, however, as regards his contributory efforts in reaching out to readers of the day that much can be said of the essays that were written by him. These writings covered the political economy, they covered matters related to the making and the practice of economic policies, and at the illustration level they covered matters related to protectionism, and to those related to taxes and taxation. The contribution of Bastiat is relevant today when we need to understand the manner in which there occurs the progress of dissemination of economic ideas.54 This as Bastiat pointed out was an important part of societal move forward. It is about the manner in which society and its members, who all have a stake in matters of the day and also in matters of the future, get to be organized for a larger fulfillment of objectives both at an individual level and that at the level of the nation. It is true that a whole lot of changes have occurred in almost all facets of activities that get carried out as part of activities of the State and its citizens when a comparison is made of that prevalent today over that prevalent at the time that Bastiat wrote about. These include structure of political economies, that of policies that are crafted, and those of specific policies such as taxation that are introduced as part of governance. What have probably remained unchanged are a desire for harmony, and the need for debates that treats economic sophisms in a manner that unveils the unseen. Those are the reasons for studying the contributions of Bastiat.

End-notes and Additional Thinking
1 For a history of the Journal with details of authors and papers published, see Hart, D., Journal des Economistes, at .
2 Schumpeter, J. H. (1954), History of Economic Analysis, Oxford University Press, New York, p. 500.
3 Hazlitt, H. (1996), “Introduction”, in Bastiat, F., ‘Economic Sophisms’, (Edit/Trans. Goddard, A, trans.), The Foundation for Economic Education, p. 5.
4 Schumpeter, J. H. (1954), History of Economic Analysis, ibid, p. 500.
5 Hayek, F. A. (1995), “Introduction”, in Bastiat, F., ‘Selected Essays on Political Economy’, (Edit/Trans. Seymour, C, trans.), The Foundation for Economic Education, p. 5.
6 DiLorenzo, T. J. (), ‘Frederic Bastiat (1801 - 1850): Between the French and Marginalist Revolutions’, accessed at http://ruby.fgcu.edu/courses/twimberley/EnviroPhilo/Bastiat.pdf on 12th February 2011.
7 Hulsman, J. G. (2003), ‘Facts and Counterfactuals in Economic Law’, Journal of Libertarian Studies, Volume 17, Number 1, pp. 57-102.
8 Roche, G. C. (1971), ‘Frederic Bastiat — A Man Alone’, Arlington House, New Rochelle, New York, p. 20.
9 Richman, S. (2000), ‘Annotated Biography of Frederic Bastiat’, Library of Economics and Liberty, accessed at http://www.econlib.org/library/Bastiat/BastiatBib.html on 4th February 2011.
10 A listing of articles published in the October 1844 Volume of the Journal des Economistes of which that written by Frederic Bastiat (De l’influence des tarifs francais et anglais sur l’avenir des deux peuples ) are available at the site .
11 Roche, G. C. (1971), ‘Frederic Bastiat — A Man Alone’, op cit., p. 42.
12 Roche, G. C. (1971), ‘Frederic Bastiat — A Man Alone’, op cit., p. 44.
13-20 Bastiat, F. (1996), ‘Economic Sophism’, trans. George B. de Huszar, ed. W. Hayden Boyers, Foundation for Economic Education, p. 34, accessed at http://www.econlib.org/library/Bastiat/basHarApp.html#Appendix on 2nd February, 2011.
21 Roche, G. C. (1971), ‘Frederic Bastiat — A Man Alone’, op cit., p. 114.
22 Bastiat, F. (2007), “Petition of the Manufacturers of Candles”, in ‘The Bastiat Collections’, Volume I, Ludwig von Mises Institute, Alabama, p. 228.
23 Roche, G. C. (1971), ‘Frederic Bastiat — A Man Alone’, op cit., p. 110.
24 Hulsman, J. G. (2001), ‘Bastiat’s Legacy in Economics’, The Quarterly Journal of Austrian Economics, Volume 4, Number 4, p. 56.
25 Bastiat, F. (2007), “To the Youth of France”, in ‘The Bastiat Collection’, Volume II, Ludwig von Mises Institute, Alabama, p. 4.
26 Bastiat, F. (2007), “To the Youth of France”, ibid, p. 4.
27 Bastiat, F. (2007), “To the Youth of France”, ibid, p. 6.
28 Bastiat, F. (2007), “To the Youth of France”, ibid, p. 8.
29 Bastiat, F. (2007), “Wants, Efforts, Satisfaction”, in ‘The Bastiat Collection’, Volume II, Ludwig von Mises Institute, Alabama, p. 48.
30 Bastiat, F. (2007), “Wants, Efforts, Satisfaction”, in ‘The Bastiat Collection’, Volume II, ibid, p.50.
31 Bastiat, F. (1998), ‘The Law’, Translated from the French by Dean Russell, Foundation for Economic Education, Irvington-on-Hudson, New York, p.1.
32 Bastiat, F. (1998), ‘The Law’, ibid, p. 2.
33 Bastiat, F. (1998), ‘The Law’, ibid, p. 68.
34 Bastiat, F. (1998), ‘The Law’, ibid, p. 68.
35 Ebeling, R. (1998), “Introduction”, in ‘The Law’, ibid, p. xvii.
36-40 Bastiat. F. (1995), “State”, in ‘Selected Essays on Political Economy’, trans. Seymour Cain, ed. George B. de Huszar, Foundation for Economic Education, Irvington-on-Hudson, New York, pp. 10 – 18
41 Roche, G. C. (1971), ‘Frederic Bastiat — A Man Alone’, op cit., p. 217.
42 Bastiat, F. (2007), “The Broken Window”, in ‘The Bastiat Collection’, Volume I, Ludwig von Mises Institute, Alabama, p. 2.
43 Bastiat, F. (2007), “The Broken Window”, in ‘The Bastiat Collection’, ibid, p. 4.
44 Caplan, B. and Stringham, E. (2004), ‘Mises, Bastiat, Public Opinion, and Public Choice’, p. 10, accessed at http://mpra.ub.uni-muenchen.de/26084/1/Mises_Bastiat_Public_Opinion_and_Public_Choice_2004_06_01.pdf on 25th January 2011.
45 Ebeling, R. (1998), ‘Introduction’, ‘The Law’, ibid, p. xv.
46 Bastiat, F. (2007), “The Tax Gatherer”, in The Bastiat Collection, Volume I, Ludwig von Mises Institute, Alabama, p. 381.
47 Bastiat, F. (2007), “Our Products Burdened by Taxes”, in The Bastiat Collection, Volume I, Ludwig von Mises Institute, Alabama, p. 217.
48 Bastiat, F. (2007), “Our Products Burdened by Taxes”, in The Bastiat Collection, ibid, p. 219.
49 Hazlitt, H (1946), ‘Economics in One Lesson’, Harper and Brothers Publishers, New York, p.5.
50 Russell, D. (1996), “Introduction”, in Bastiat, F., ‘Economic Harmonies’, trans. George B. de Huszar, ed. W. Hayden Boyers, Foundation for Economic Education, Irvington-on-Hudson, New York, p. 6.
51 Thorton, M. (2001), ‘Frederic Bastiat as an Austrian Economist’, Journal des economists, et des etudes humaines, Volume 11, Number 2/3, pp. 387-398 in Hulsman, J. G., ibid, p. 55.
52 Hulsman, J. G. (2003), ‘Facts and Counterfactuals in Economic Law’, Journal of Libertarian Studies, Volume 17, Number 1, p. 94.
53 Henry, J. F. (2008), ‘The Ideology of the Laissez Faire Program’, Journal of Economic Issues, Volume XLII, Number 1, pp. 209-224.
54 Marc, J. (2006), ‘The economic doctrines in the wine trade and wine production sectors: the case of Bastiat and the Port wine sector: 1850-1908’, Munich Personal RePEc Archive, p. 2, accessed at http://mpra.ub.uni-muenchen.de/26690/1/MPRA_paper_26690.pdf on 2nd February 2011.

(Dr. Pradeep Banerjee is a business consultant over the last five years with a focus on firm strategy management. He is managing a software company (Oakdene (India) Software Services Private Limited, Bangalore) as Director for about ten years. He is also serving as Corporate Executive for about two decades at Tata Engineering and Locomotive Company Limited, Bombay, Telco Dealers Leasing and Finance Company Limited, Bombay and India Tobacco Company Limited, Bombay. He is also a visiting faculty at Convergence Institute of Media Management and Information Technology Studies (COMMITS) at Bangalore. He has wriiten many articles/papers in Journals related to economics and business management.

The views expressed in the write-up are personal and do not re?ect the official policy or position of the organization.)




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