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20130824 Two men of Political Economy – Bastiat and Marks


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Two men were born early in XIX century – one in France and another in Germany with difference of 17 years. Both were lucky because they had opportunity to avoid working for living and had time to develop and express their views on political economy, society and how it should be organized. The older one – Frederic Bastiat had extensive experience in business early in his life while the younger one – Karl Marx had never been in business and was fully immerged in theoretical world of intelligentsia.

It is hard to imagine two more polar ways of thinking and expressing ideas then these two men did. One – Bastiat had clear views of economic world, expressed it in crystal clear and logical way in a number of short essays with great examples, which could be easily multiplied by anybody with any ability for logical thinking whatsoever. Another one – Marx wrote huge volumes of extremely muddled text that was progressively deteriorating with age of author.

It would be puzzling why the smart one – Bastiat was mainly unknown while semi crazy blabber – Marx become a great founder of mass movement that caused and still causes innumerable suffering for millions of people if not the simple fact that Marx’s ideal promised a paradise in the near future, while Bastiat just explained how economy works and correctly predicted the sad consequences of meddling with the free market.

This volume was compiled from Bastiat’s works in 1995 contains key components of his ideas. These are:

• Capital deserves to be paid for with interests because it is a necessary component of production. Without interest individuals in possession of capital would not agree to provide it and therefore no production could possibly occur. The private owner of capital is also a necessary player because only private owner who gets not only gains, but also losses would be interested enough to allocate all his abilities to finding the best application of capital as defined by highest amount people who would agree to pay for it in interest. The very sad history of real socialism abundantly demonstrated that huge price is paid for removing capitalists and substituting them with bureaucrats who do not take losses and whose gains are not related to performance of capital they manage.

• Another set of ideas relates to the notion of seen and unseen consequences of decisions. Bastiat provides a number of examples:
o Broken window – job for repair is seen, while alternative use of resources is not
o Military expenses – well paid troops and supporting businesses are seen while much better use of manpower and resources for producing goods and services is not seen
o Taxes used to provide something useful for everybody are seen, but use of money by original owners that would be much more efficient is not seen
o This list goes on and on and each example well thought through, clear and convincing

• Finally the discussion of government as violent way for elite to enjoy the fruits of other people’s labor is just wonderful. I love his definition of government as “the great fiction, through which everybody endeavors to live at the expense of everybody else”. Probably this is the key to popularity of Marx after all. His muddled works seems to provide foundation for people to believe that they all will be able happily live at the expense of others. Too bad that chances to achieve it are somewhere out there next to the ability to build perpetuum mobile, while price is very real – miserable lives for just about everybody.

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