Bastiat: You can’t spend the same money twice

Frédéric Bastiat was born on June 29th, 1801. He brought a great deal of sense, together with some humour, into the study of political economy. One of his most famous arguments against protectionism takes the form of a satirical plea from the candle-makers and tallow producers to the Chamber of Deputies, requesting that the sun be blotted out to reduce the unfair competition it gives them.

Another of his “Economic Sophisms” is a petition to the king to make it illegal for people to use their right hands. He was mocking the idea that making more work creates more wealth. In a further one he suggests that if a railway connected France to Spain, enabling each to buy what the other produced more cheaply, domestic manufacturers would demand tariffs to protect their output, thereby negating the railway’s benefit. If government then broke the railway, the tariffs would be unnecessary. It might be better, he suggested mischievously, just to build a broken railway in the first place.

Most famous of all is his “broken windows fallacy,” which introduces the notion of opportunity cost, although that name was only given to it much later. The shopkeeper’s son breaks a window. The glazier comes to fix it, and receives 6 francs for his work. He spends that in town, and others in turn spend the extra money, apparently boosting the local economy. No, says Bastiat. That is only what is seen.

“It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.”

The shopkeeper is back where he started with a complete window, but he is 6 francs poorer, and those 6 francs could have boosted the local economy. This is opportunity cost; you have to include in the cost of doing something the other things you might have done instead. Money spent on a night at the races cannot also be spent on the theatre or at a restaurant.

Bastiat was strongly for free trade and limited government. He wanted government to protect life, liberty and property. If it used its powers to take from one person to give to another, it was engaging in legal plunder. If government engages in this, he declared, “it can grow endlessly.”

He engaged in politics himself, being elected to the National Legislative Assembly after the 1848 revolution, but died of TB shortly afterwards, aged only 49. His contribution, his name and his ideas continue to live, though, as a humorous counter to some of the sillier ideas put forward by people ignorant of economics.