Posts tagged with: frederic bastiat

It's_a_Wonderful_Life[Note: This is the final post in a series highlighting some of the financial aspects and broad economic lessons of Frank Capra’s holiday classic, It’s a Wonderful Life. You can find part one here and part two here.]

Economist Don Boudreaux recently outlined ten foundational lessons that should be learned in every well-taught principles of economics course. Examples of nearly all of the ten lessons can be found in Capra’s Christmas classic, but for the sake of brevity I’ll merely highlight two of them.

Principle 1: The world is full of both desirable and undesirable unintended consequences – consequences that are largely invisible but that even a course in ‘mere’ principles of economics gives us great vision that enables us to “see”.

This holiday film may be attributed to Frank Capra, but it could have just as easily been called “Frederic Bastiat’s ‘It’s a Wonderful Life’.” The central theme of the film is a creative example of Bastiat’s “That Which is Seen, and That Which is Not Seen”—which is (as both Boudreaux and I claim) the most important essay in economics.

In the opening line of his essay, Bastiat writes,

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Hurricane IkeAfter 6,712 cyclones, typhoons, and hurricanes the evidence is clear: Bastiat was right all along.

In 1850, the economic journalist Frédéric Bastiat introduced the parable of the broken window to illustrate why destruction, and the money spent to recover from destruction, is not actually a net benefit to society (see the video at the end of this post for an explanation of the broken window fallacy). For most people the idea that destruction doesn’t help society would seem too obvious to warrant mentioning. But some liberal economists argue that destruction can lead to an economic boom, mainly because it provides the government with an opportunity to spend more money.

If the liberal economists are right, then we should find that destructive storms lead to economic growth. But a pair of researchers, Solomon M. Hsiang and Amir S. Jina, have recently published a study that shows the exact opposite. Using meteorological data, they reconstructed every country’s exposure to the 6,712 cyclones, typhoons, and hurricanes that occurred during 1950-2008 and then measured the long-term growth:
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cherrypieShould we always take the side of the individual consumer?

That’s the question Rod Dreher asks in a recent post on “Amazon and the Cost of Consumerism.” It’s a good question, one that people have been asking for centuries. The best answer that has been provided—as is usually the case when it comes to economic questions—was provided by the nineteenth-century French journalist Frédéric Bastiat.

Bastiat argues, rather brilliantly, that,

consumption is the great end and purpose of political economy; that good and evil, morality and immorality, harmony and discord, everything finds its meaning in the consumer, for he represents mankind.

He summarizes his argument as follows:

There is a fundamental antagonism between the seller and the buyer.

The former wants the goods on the market to be scarce, in short supply, and expensive.

The latter wants them abundant, in plentiful supply, and cheap.

Our laws, which should at least be neutral, take the side of the seller against the buyer, of the producer against the consumer, of high prices against low prices, of scarcity against abundance.

They operate, if not intentionally, at least logically, on the assumption that a nation is rich when it is lacking in everything.

Bastiat uses this as the basis of his argument that the interests of the consumer, rather than the producer, align more closely with the interests of mankind (see addendum below for more on this reasoning). Producers want scarcity since it increases their profits. If they can’t produce scarcity in the market, they’ll seek out government protections that create artificial scarcity (which is why those who are pro-business are rarely pro-market).

Book publishers don’t like the fact that Amazon is reducing the scarcity of their product, because it lowers the cost. But what is the result from the consumer side? The lower prices allow consumers to consume more books than they otherwise would be able to afford.
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Radio Free ActonIt’s time again for another edition of Radio Free Acton, and we think this one is well worth the listen. Today, Paul Edwards talks with scholar, author, economist, occasional guest host of the nation’s largest talk radio show and all-around great guy Dr. Walter E. Williams about Frederic Bastiat’s classic The Law and the insights into modern America by reading that classic defense of limited government, authentic justice and human freedom. Williams wrote the introduction for the latest edition of Bastiat’s work, which is available for purchase in the Acton Bookshop at the link above, and said of the book that it “created order in my thinking about liberty and just human conduct.”

The lively conversation between Edwards and Williams is available via the audio player below.

Panel moderator Elise Amyx, blogger Jacqueline Otto Isaacs, panelist Taylor Barkley

Panel moderator Elise Amyx, blogger Jacqueline Otto Isaacs, panelist Taylor Barkley

While acknowledging that the Bible is not a book of political theory, a recent panel hosted by The Institute for Faith, Work and  Economics asked whether or not Christianity and libertarianism were compatible. The panel, moderated by former Acton Institute intern Elise Amyx, was made up of young evangelicals eager to tackle the question. They came up with 5 reasons that Christianity and libertarianism were indeed compatible.

1. Christianity Celebrates Voluntary Action, Value Creation

Jacqueline Otto Isaacs, a blogger at Values & Capitalism, explained that the Christian worldview also supports libertarianism. ‘The message of the Gospel, the good news, is that salvation from our sins is offered through Christ — this salvation is voluntary and individual, and this is the core message of Christianity, Isaacs declared.

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Man-of-Steel-General-Zod-HelmetIn the new movie Man of Steel, Superman engages in a fight with his fellow aliens from Krypton that causes significant damage to Metropolis. Disaster expert Charles Watson estimates the costs of the physical damage done to the city to be about $2 trillion. To put that in context, 9/11’s physical damage cost $55 billion, with a further economic impact of $123 billion.

What would be the impact of Superman’s fight on the economy? According to some liberal economists, it would lead to a economic boom. In defending President Obama’s stimulus proposal in 2011, Paul Krugman proposed a peculiar solution for economic recovery that mimics the one in Man of Steel: prepare for an alien invasion.

“If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months,” he declared, arguing in favor of the president’s stimulus package. “And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better [off].”

Man of Steel must be Krugman’s favorite movie: you not only get an alien invasion (Kal-El, General Zod and his soldiers) but you get alien destruction on a massive scale. Just think of all the economic benefit Metropolis gained!
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In a new paper, “Concepts and Implications of Altruism Bias and Pathological Altruism,” Barbara Oakley of Oakland University argues that scientists and social observers have mostly ignored the harm that can come from altruism. Though “the profound benefits of altruism in modern society are self-evident,” Oakley observes, the “potential hurtful aspects of altruism have gone largely unrecognized in scientific inquiry.”

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Aiming to lay the groundwork for such inquiry, Oakley focuses on what she calls “pathological altruism” — “altruism in which attempts to promote the welfare of others instead result in unanticipated harm.” As for whether such behavior is “intended,” Oakley believes it can emerge from “a mix of accidental, subconscious, or deliberate causes,” though it can be more clearly identified by whether an external observer would conclude that the harm was “reasonably foreseeable.”

In other words, the pathologically altruistic have a sort of tunnel vision, a way of looking at the world around them that lends toward destructive self-sacrifice. Some already know it, others simply should. (more…)