Renewing our minds: Bastiat's Economic Sophisms (Introduction and Abundance & Scarcity) 3

Bastiat's first full essay in this compilation, is dedicated to an examination of two competing economic theories he terms: the theory of abundance and the theory of scarcity.  Basically, the question at issue is:  Is it better for society-as-a-whole when lots of good are produced (abundance) and the prices of those goods drop very low; Or, is it better for society-as-a-whole when very few goods are produced (scarcity) and the prices of those goods are very high.  Though the answer seems quite obvious when phrase this simply, Bastiat contended that in his own day (as in ours) there were a great many people who actually embraced the theory of scarcity. 

Speaking of his day, Bastiat observed:  "Do we not hear it said every day, 'The foreigner is about to inundate us with his products?'" (p. 5)  It doesn't take too much reflection to realize this language might just as well have been culled from contemporary economic prognostications about trade imbalances, the evils of NAFTA, off-shoring, the scourge of foreign cars, etc.

Bastiat traced this irrational belief to the failure of most Frenchmen of his day to recognize that they were both producers and consumers. Human nature being what it is, Bastiat notes, as producers we're all prone to favor a shortage of whatever it is we produce.  Because the fewer people there are producing it, the more money we'll make for being the few who do produce it.  If I own a dairy farm, for example, my ideal situation is to be the only dairy farm in existence.  I can secretly wish this to happen via some "act of God" like a series of tornados that wipes out all of my competition; Or, I can wish for the government to act where God hasn't by imposing rules and regulations on the dairy industry in such a way that they benefit me, but punish all of my competitors.  This happens all the time in American economic policy.  If I have a big dairy farm, it's in my best interest to support any government bureaucrat or politician who promises to impose "strict, demanding, regulations on the dairy industry" because that will make it very unlikely that my neighbor will try to go out and start a dairy that might compete with me.  He/she likely won't have access to sufficient capital to comply with all  the government regulations necessary to start the business...so, in the end, he/she won't even bother.  Meanwhile, I'll sit back and rake in profits because I'm the only producer.  You'll buy what I offer, at the price I offer it, because you will effectively have no other choice.  If you propose to buy milk from foreign dairies, I'll encourage my legislators to rail against the evils of "sending American jobs overseas" or some such talking point.  Clearly, this situation will enrich me...but does it enrich society-as-a-whole?

Bastiat points out that under the theory of abundance--in which there are lots of dairy producers--there would be a lot of price competition.  This would tend to drive prices lower and lower.  So, instead of paying $4 a gallon for milk, you might pay only $1 a gallon.  This would be great for you, as your cost will now have dropped by 75%.  Things will be bad for me, of course, because my profits are now down 75%.  However, if I am a wise business person, and if the theory of abundance (i.e., free trade and free markets) has been applied to the economy as a whole, I will realize that the 75% drop in my profits can be made up in other ways.  First, if the theory of abundance is applied across the entire economy, then the costs of things other than dairy products should be dropping as well.  In other words, the cost of feed for my dairy cows should be lower.  The costs of the medicines I must use on them should be lower, my fuel costs, my electricity costs, should all be lower...because there would be more of everything.  Second, my theoretical profit losses would also be blunted by the fact that lower dairy prices would likely encourage far more people to purchase milk--and to purchase it in greater quantities than they did when it was $4 a gallon.  If the price of a gallon of milk drops to 1/4 what it was, but I'm now selling five times as much milk as I did before, I still come out ahead.  You pay less for a gallon of milk and have more producers to choose from; And I (if I am really a good businessman and work hard to please my customers) can actually sell more milk. 

Renewing our minds: Bastiat's Economic Sophisms (Introduction and Abundance & Scarcity) 2

See the earlier post and comments here

Against the anticipated charge that he was not offering any real solutions to the economic problems facing France, Bastiat preemptively reminded his accusers that his primary purpose in this book was to "combat sophisms"  (i.e., to demonstrate that stupid ideas are, in fact, stupid).  Then he makes a great point, "to destroy an error, is to build up the truth which stands opposed to it." (p. 3)

I fear that far too many conservatives fail to understand this simple concept.  We allow ourselves to be baited into defending ourselves against ridiculous charges (e.g., that Romney was going to take away all birth control and unilaterally outlaw abortion, that George Bush was systematically destroying civil liberties and attempting to create a theocracy, etc.), rather than challenging the stupidity of Leftist "logic" and calling it out for what it is. 

We are engaged in a time right now, when the most important thing we can do is return to the basics of communicate the message of individual liberty, limited government, and fiscal restraint in a language that our friends and neighbors can understand.  Let us not get wrapped up in defending ourselves against ridiculous charges.  Let us not,thereby, lend credence to their ridiculous charges.  Let us, rather, call them out directly for transparent smear attempt.  Let us then denounce them for using such cowardly tactics, and then call upon them to answer the real question:  "If the economic policies you're advocating are so great, why do they keep failing?"

Renewing our minds: Bastiat's Economic Sophisms (Introduction and Abundance & Scarcity)

As suggested in a previous post, the RSS Ronald Reagan will launch an initiative to help educate the rank-and-file, grassroots conservatives/libertarians.  If you'd care to join us, we'll start by reading Frederic Bastiat's Economic Sophisms.  

We'll begin by reading the Introduction, and Abundance & Scarcity (pp. 1-13).  Please utilize this post's comments function to share reflections, questions, etc. from these pages.  To whet your appetite in the meantime...

And again on the consequences of the 2012 election...

from today's news:

Vegas Employer: Obama Won, So I Fired 22 Employees

America, you voted for this. President Obama was up front about what he wanted to do in a second term. He had a four year record of where his economic policies led. If you voted for President Obama and "had no idea" this would happen, it's because YOU chose to stick your head in the sand and pretend that 2 + 2 could equal 5 if so declared by a charismatic leader.

As the consequences of President Obama's brand of economics continue to pile up, there will be voices that seek to pin blame solely on the President-as-an-individual. This will be unjust and self-serving. President Obama will be no more to blame than Sen. Reid, Rep. Pelosi, and hundreds of other political "leaders" who lent their support to these policies. He will be no more to blame than the millions of Americans who, by their votes, gave him a mandate to do this.

There will be others (chiefly President Obama and the national Democrats) who will seek to convince us that the predictable economic calamities were "unexpected"...that "no one could have foreseen" them...that they were the results of tsunamis, hurricanes, or the ghastly spectre of George W. Bush's presidency reaching all the way across eight years to inflict wounds upon the Camelot-that-would've-been-if-only... This too will be false.

When this time comes--as I surely believe it will--I hope you will remember the words of Cassius in Shakespeare's play "Julius Caesar." Cassius, a nobleman, is speaking with his friend, Brutus, and trying to persuade him that, in the best interests of the public, Julius Caesar must be stopped from becoming monarch of Rome. Brutus is aware of Caesar's intentions, and is torn between his love of his friend Caesar and his duty to the republic. Cassius continues by reminding Brutus that Caesar is just a man, not a god, and that they are equal men to Caesar:

"The fault, dear Brutus, is not in our stars,
But in ourselves, that we are underlings."