A Pedagogical Note on Bastiat's Restraint of Trade
Bohanon, Cecil E., Journal of Private Enterprise
Fredric Bastiat was a great expositor of free trade. This note uses his essay on "Restraint of Trade" to distinguish between marginal and infra-marginal units of domestic production that are forthcoming when an embargo is imposed on an imported product. This not only clarifies Bastiat's analysis but also provides a springboard for teaching the marginal infra-marginal distinction.
JEL Codes: A20, B12, F11
Keywords: Fredric Bastiat; Marginal analysis; Trade theory; Economic education
Fredric Bastiat's writings are well-regarded works of classical economic exposition. Bastiat made powerful, succinct, and convincing arguments for free markets. Yet, to the best of anyone's knowledge, he never drew a diagram, scribed a mathematical equation, or collected a data set. Moreover, his popular appeal has been persistent. In 1909 Bastiat's Fallacies of Protection was republished. The book review editor at the Journal of Political Economy described it as "brilliant and famous" and highlighted the edition's glowing introductory note by then British Prime Minister H.H. Asquith. (Book Review and Notices, 1909, pp. 652-53) Henry Ha2Ütt's Economics in One Lesson, originally published in 1946, openly and enthusiastically acknowledges the book's debts to Bastiat (Ha2Ütt, 1946). Friedrich Hayek wrote the introduction to the 1964 translation of Bastiat's Selected Essays in Political Economy. "? Bastiat's writings continue to be widely available. A new collection of his previously translated works appeared in 2007, and a collection of some of his previously untranslated work was released in 2011 (Bastiat, 2007, Bastiat, 2011).
The purpose of this note is to examine Bastiat's essay "Restraint of Trade" as a classroom exercise. Although Bastiat's basic insight is correct, his analysis is incomplete because he does not and perhaps could not distinguish between marginal and infra-marginal units. We may excuse Bastiat; after all, marginal analysis was not part of the general body of economic knowledge in his time.2 Moreover, Bastiat's essay focused on changes in the terms-of-trade for a single unit of consumption by his representative citizen John Goodfellow. This was undoubtedly because he was striving to make a clear and convincing point to a popular authence. Economics instructors can empathize with the difficulty of transitioning from analysis of a single unit to analysis of multiple units. It is precisely this kind of expositional difficulty that is the justification for much of the analytical framework of undergraduate economics. Bastiat would surely applaud his exposition being a springboard to emphasize the importance of a more complete understanding of microeconomics of international trade via marginal analysis!
Bastiat begins his analysis from the perspective of a French iron mine owner frustrated by the competition from lower-cost Belgian mines. The French mine owner, aptly named Mr. Protectionist, opines, "Belgian iron is sold in France at ten francs (per hundred kilogram) which forces me to sell mine at the same price. I should prefer to sell mine at fifteen and cannot because of this confounded Belgian iron" (Bastiat, 1995, p.28). Mr. Protectionist first plans to go to the border with "four pistols" and a "cartridge box" and kill anyone who brings iron ore into France. On second thought, he decides to go to the "great law factory in Paris" and get "a nice little law saying 4BeIgIaIi iron is prohibited'" (Bastiat, 1995, p.28). Mr. Protectionist tells the legislature that if they prohibit Belgian iron so that iron prices rise to fifteen francs, "I shall extend the exploitation of my mines; I shall employ more men. My employees and I will spend more, to great advantage of our suppliers all around us. These suppliers having greater market will give more orders to industry and gradually this activity will spread throughout the country." Bastiat then reports that, "Charmed by this discourse, enchanted to learn that it is so easy to increase the wealth of people simply by legislation, the manufacturer of laws voted in favor of the restriction" (Bastiat, 1995, p. …