[Congressional Record Volume 147, Number 106 (Thursday, July 26, 2001)]
[Extensions of Remarks]
[Page E1453]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          A NEWSPAPER ARTICLE ON THE LIFE OF FREDERIC BASTIAT

                                 ______
                                 

                             HON. RON PAUL

                                of texas

                    in the house of representatives

                        Thursday, July 26, 2001

  Mr. PAUL. Mr. Speaker, I commend to the attention of members an 
editorial appearing in the Wall Street Journal which is headlined ``In 
Praise of an Economic Revolutionary.'' The column is authored by Mr. 
Bob McTeer, president and CEO of the Federal Reserve Bank of Dallas.
  In his article, Mr. McTeer highlights the life of Frederic Bastiat, a 
member of the French Chamber of Deputies during the 19th century who 
made great contributions to both individual liberty and free markets 
with clear, simple and humorous observations and arguments. Bastiat was 
a pioneer in the field of economics who fought against the 
protectionist fallacies and absurdities that persisted in his day and 
indeed continue to haunt us today.
  Bastiat understood well what few in Congress have come to grasp--that 
it is absurd to favor producers over consumers and sellers over buyers. 
This is because producers and sellers benefit from scarcity and high 
prices while consumers benefit from abundance and low prices. As a 
consequence, when government policies favor producers, the citizens of 
the United States are faced with scarcity and unnecessarily high 
prices. In essence, the economic pie is made smaller for all.
  As members of Congress we should note, as Bastiat did, that because 
we have limited resources and unlimited wants, it is unwise to create 
inefficiencies for the purpose of creating or protecting jobs. As Mr. 
McTeer writes, ``Progress comes from reducing the work needed to 
produce, not increasing it.''
  By supporting protectionist policies that tend to create stagnation 
and hurt consumers, some members stand in the way of economic progress 
that would benefit all. Yet we should reject these policies and in the 
tradition of Bastiat do away with the absurd notice that inefficiencies 
are good for this country and its people.
  Mr. Speaker, again I commend Mr. McTeer's column and encourage the 
recognition of the economic revolutionary, Frederic Bastiat.

                 In Praise of an Economic Revolutionary

                            (By Bob McTeer)

       ``The state is the great fictitious entity by which 
     everyone seeks to live at the expense of everyone else,''--
     Frederic Bastiat (1801-1850)
       Claude Frederic Bastiat was born in Bayonne, in the 
     southwest of France, 200 years ago last Friday. This week, I 
     kicked off a conference in nearby Dax, France, celebrating 
     Bastiat's contributions to individual liberty and free 
     markets.
       The whole world should be celebrating the birthday of this 
     pioneer of free-market capitalism.
       Bastiat's output was prodigious, especially in the last 
     five years of his life. Through his writing and speeches, and 
     as a member of the French Chamber of Deputies, Bastiat fought 
     valiantly against the protectionism and socialism of his 
     time. He proselytized for free trade, free markets and 
     individual liberty. His weapons were wit and satire; his 
     method was the reductio ad absurdum. More than any other 
     person before or since, he exposed economic fallacies with a 
     clarity, simplicity and humor that left opponents with no 
     place to hide.
       The most famous example of Bastiat's satire was his 
     petition to the French parliament on behalf of candlemakers 
     and related industries. He was seeking relief from ``ruinous 
     competition of a foreign rival who works under conditions so 
     far superior to our own for the production of light that he 
     is flooding the domestic market with it at an incredibly low 
     price.'' The foreign rival was the sun. The relief sought was 
     a law requiring the closing of all blinds to shut out the 
     sunlight and stimulate the domestic candle industry.
       Despite the publication of Adam Smith's ``The Wealth of 
     Nations'' decades earlier, Bastiat was still fighting the 
     mercantilist view of exports as good and imports as bad. He 
     pointed out that under this view, the ideal situation would 
     be for a ship loaded with exports to sink at sea. One nation 
     gets the benefit of exporting and no nation has to bear the 
     burden of importing.
       Bastiat once saw an editorial proposing a Bordeaux stop on 
     the railroad from Paris to Spain to stimulate local business. 
     He wondered, why only Bordeaux? Why not have a stop in every 
     single town along the way--a never-ending series of breaks--
     so the prosperity could be enjoyed by all? They could call it 
     a ``negative railroad.''
       This point is true even today. Trade with Mexico has boomed 
     since the passage of the North American Free Trade Agreement 
     and so has truck traffic across the Rio Grande. Luckily we 
     have bridges to facilitate the crossing. But while the 
     bridges were made for crossing, the hundreds of warehouses 
     near the border were not. They're for storing and waiting--
     where Mexican truckers are required to hand over their cargo 
     to domestic carriers. Bastiat had his ``negative railroads.'' 
     We have ``negative bridges.''
       Then there's Bastiat's broken-window fallacy. It seems 
     someone broke a window. It's unfortunate, but there's a 
     silver lining. Money spent to repair the window will being 
     new business to the repairman. He, in turn, will spend his 
     higher income and generate more business for others. The 
     broken window could ultimately create a boom.
       Wait a minute, Bastiat cautioned. That's based only on what 
     is seen. You must also consider what is not seen--what does 
     not happen. What is not seen is how the money would have been 
     spent if the window had not been broken. The broken window 
     didn't increase spending; it diverted spending.
       Obvious? Sure, but we fall for a version of the broken-
     window fallacy every time we evaluate the impact of a 
     government program without considering what taxpayers would 
     have done with the money instead. Some people even judge 
     monetary policy by what happens, without considering what 
     might have happened.
       Most economic myths give way to Bastiat's distinction 
     between the seen and the unseen. Related concepts include 
     half truths and whole truths, intended and unintended 
     consequences, the short run and long run and partial effects 
     and total effects. Henry Hazlitt expanded on these themes in 
     his wonderful book, ``Economics in One Lesson.'' If you don't 
     have time to read Bastiat's collected works, try Hazlitt's 
     book.
       Bastiat called attention to the absurdities that come from 
     favoring producers over consumers and sellers over buyers. 
     Producers benefit from scarcity and high prices while 
     consumers benefit from abundance and low prices. Government 
     policies favoring producers, therefore, tend to favor 
     scarcity over abundance. They shrink the pie.
       Bastiat stressed that because we have limited resources and 
     unlimited wants, it's foolish to contrive inefficiencies just 
     to create jobs. Progress comes from reducing the work needed 
     to produce, not increasing it. Yet, a day doesn't pass that 
     we don't hear of some proposal to ``create jobs,'' as if 
     there's no work to be done otherwise. If it's jobs we want, 
     let's just replace all the bulldozers with shovels. If we 
     want even more work, replace shovels with spoons. Bastiat 
     suggested working with only our left hands.
       I was cautioned that most of the participants in the 
     Bastiat conference would probably be from other countries, 
     since Bastiat's free-market views aren't highly regarded in 
     France. That reminded me of my visit to Adam Smith's grave in 
     Scotland a couple of years ago. I went into a souvenir shop 
     about a block away and asked what kind of Adam Smith 
     souvenirs they had. They not only didn't have any, they'd 
     never even had a request for one before. What a shame!