It was a nice bit of irony to read someone denigrating Bastiat's little parable, while at the same time completely getting the point of it wrong.
In my previous post I pointed out that the writer's criticisms of 'The Broken Window' were straw man and red herring fallacies, since the issues he raised (the supply of money, and paying people with printed money) had nothing to do with the opportunity cost of production described in 'The Broken Window'.
Well, here's more fun irony from the same author. It's no surprise that he doesn't like Bastiat's writings, given that Bastiat didn't argue in support of the popular fallacies he keeps repeating --
http://www.slate.com/blogs/moneybox/2012/08/18/why_i_don_t_love_frederic_bastiat.html
Why I Don't Love Frederic Bastiat
Brian Caplan made a great observation last week, namely that right-wing economic thinkers tend to really love Frederick Bastiat while those more on the left don't. Then in a second and much worse post, he kind of posits a broad conspiracy theory as the reason. To me the second post is emblematic of exactly what I think is unimpressive about Bastiat namely that, much like Caplan, at key points Bastiat seems to me to be assuming what he's trying to argue for. At the same time, he's a great writer with a flair for a great turn of phrase. So if you already agree with what he's saying, you're likely to find quoting or referencing him amusing. But if the goal is to actually persuade someone of something, his writing is pretty unimpressive.
The best example of this is probably "The Candlemaker's Petition" which is a pretty hilarious satire of rent-seeking. And obviously rent-seeking is a real thing, worthy of being satirized. But there are no political controversies for or against pure rent-seeking. The candlemakers' petition is a devastating satire of pharmaceutical companies' endless lust for patent rents, unless you happen to think that pharmaceutical patents and the monopoly rents they generate are a crucial engine of R&D funding and life-saving research. Are the pharmaceutical companies right? I think it's questionable, but I also don't think you'll find the answer in Bastiat.
Similarly, Bastiat's alleged broken windows fallacy involves simply assuming that there's no such thing as genuinely idle resources or an "output gap." In that context, yes, it's a vibrant intuitive depiction of crowding out. But this doesn't counter any Keynesian or monetarist points about the viability of stimulus during a recession induced by nominal shocks, it involves assuming that no such recessions can occur even though they plainly do. In defense of Bastiat, at the time he was writing the modern industrial business cycle was a very new thing and the vast majority of economic ups and downs were caused by things like bad weather which—as you can see in the corn futures market today—is indeed a decisive consideration in an agricultural economy. But that's no excuse for people sitting around in 2012 to be pounding the table with an old book that's non-responsive to modern issues professing to be baffled why people don't find it more persuasive.
I found it fascinating that he is able to pack so many false statements into a few paragraphs. And I found it disappointing that when I search on 'Bastiat' at google.com, his poorly written piece (quoted above in its entirety) comes up on the first page of results, giving it credence as an important piece of writing.
Here's a list of some of the false statements contained in the quote above. Basically, what he wrote is pure fallacy from beginning to end --
- His description of Bryan Caplan's intial observation in the first sentence is false: '... namely that right-wing economic thinkers tend to really love Bastiat while those more on the left don't'.
- If you read Bryan Caplan's post, you'll see that he stated that "free-market economists almost always love Bastiat's classic essay 'What Is Seen and What Is Not Seen'", but he did not state that economic thinkers on the left don't like Bastiat -- indeed, he was asking for reactions to Bastiat's essay 'What Is Seen and What Is Not Seen'. Bryan Caplan got to the ideological divide on Bastiat in his second post, after he got responses to his question.
- His description of Bryan Caplan's second post, regarding who and who does not love Bastiat, is also false: '... he kind of posits a broad conspiracy theory as the reason.'
- Caplan gave a very simple explanation for Bastiat's 'differential ideological appeal', as he called it: the public finds the straw man arguments used to support popular welfare state policies as pleasantly convincing, and Bastiat destroys these inane arguments, making it harder to support popular welfare state policies. This has nothing to do with a conspiracy theory, but rather the obvious point that Bastiat made a career of debunking popular myths.
- His comment in the third sentence is especially interesting in its irony: '... what I think is unimpressive about Bastiat namely that, much like Caplan, at key points Bastiat seems to be assuming what he's trying to argue for.'
- You couldn't make this up. It's as if he started describing himself without realizing it. See his post that he linked to in the quote above on the 'alleged broken windows fallacy', for an excellent example of 'assuming what he's trying to argue for' in his own writing. (Here's my detailed description of the problems in that post)
- His second paragraph regarding Bastiat's satirical piece on protectionism, 'The Candlemaker's Petition', massively confuses the issue (again), by equating the attempt to use patent law to protect creative property, with rent seeking.
- Notice that 'rent seeking' describes attempts to profit from the political process without adding wealth -- study the recent Supreme Court Decision, Harris v. Quinn, for a real example (a union using the political process to force dues collection). Describing pharmaceutical companies as having an 'endless lust for patent rents' equates the attempt to prevent others from profiting from one's own work (i.e. one's product development), as an attempt to seek payment from government without having produced a product, and also as an attempt to prevent others from selling their own products. Patent law doesn't do this. And Bastiat's satire, 'The Candlemaker's Petition', has nothing to do with it, since it deals with protectionism, rather than protecting creative property.
- His last paragraph is a perfect illustration of the criticism he stated in his first paragraph: 'assuming what he's trying to argue for' .
- Nothing he wrote in the last paragraph applies to what Bastiat wrote in 'The Broken Window'. Bastiat made no assumption about a supposed "output gap" as he stated -- that has nothing to do with the opportunity cost of production, as Bastiat described it in 'The Broken Window' -- the existence (or non-existence) of a supposed "output gap" doesn't address the obvious fact that the work and resources consumed to replace something that was lost, are not adding wealth. Whether a government stimulus can be effective, is a separate issue -- even if true, it doesn't magically eliminate the opportunity cost of production.
- His last paragraph is really pure comedy, given his previous criticism regarding 'assumptions'. He raises more straw men for 'The Broken Window' (it assumes no "output gap", it assumes no recessions), and then he gives no support for his weak assumption of 'the viability of stimulus'. Even more than this assumption having absolutely nothing to do with the 'The Broken Window', it's easy to find data challenging its validity.
Consider the usefulness of one of the programs that was part of the 'American Recovery and Reinvestment Act of 2009': the subsidization of rural broadband. In three of the areas that received stimulus funds to expand broadband access, $349,234 was spent per unserved household to get them broadband access.
Now consider this absurd quote from the 'great' economist John Maynard Keynes from his 'General Theory of Employment, Interest, and Money' (see Chapter 10, part VI) --
http://www.forbes.com/sites/nickschulz/2011/07/05/how-effective-was-the-2009-stimulus-program/
If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.
This is what gets passed around as wisdom. Notice that it would be much more effective to simply give people money to spend on themselves -- then at least we'd know that someone got something useful from the spending.
Of course, these nonsensical arguments will never stop coming, given how many people are supported by them -- it's concentrated benefits, and dispersed costs, again. Certainly, the individuals that received the $349,234 per household for expanding broadband access don't want them to stop.
If you believe the government can correct an economic downturn, then you can't rightfully complain about this kind of lunacy -- you asked for it.
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