In 1965 the Volker Fund published new translation of three volumes by 19th century economist Frederic Bastiat; namely his Economic Sophisms, Selected Essays on Political Economy, and Economic Harmonies. Today’s document is an essay entitled “Bastiat for ‘65” by Henry Hazlitt on the importance of these, then, new translations of Bastiat’s work. The fallacies Bastiat tackled back in the mid-19th century were still as alive as ever in 1965. Sadly, these fallacies are still alive and well today in 2011. The good news is that Bastiat’s writings are still around to set us straight.
Take, for just one of many possible examples, the current drive for stricter immigration laws. Recently Alabama governor Robert Bentley has signed the nations strictest immigration law. The issue is certainly one many Americans take very seriously. One concern many have with allowing more immigration is the loss of American jobs to foreign workers. This logic is not wrong but rather is incomplete. This is a consequence of looking only at the immediate direct effects rather than all the effects in the long run. As Bastiat put it, we need to see the seen, as well as the unseen.
If asked almost everyone would clearly prefer more to less, but by supporting tougher immigration individuals are advocating a desire for less. Meaning they desire to have fewer in the labor force by keeping foreign workers out. Why? Well, mostly out of a false premise. They view the number of jobs as a fixed pie, if an immigrant takes a job then that is one job an American cannot have. They also see that this would also mean lower wages for those “lucky” Americans who still have their jobs. The more labor that enters the market, the more wages are depressed.
These presumptions are, however, false. Immigrants do not steal domestic jobs. This is because in the long run higher number of labor frees up individuals to move on to producing different and new goods and services that were not possible when there were fewer in the labor force. The pie is not fixed; in fact, more labor allows the pie to grow. Wages also don’t end up being depressed either. Why? Well, most immigrants don’t substitute for domestic skill sets, they complement them, again this frees up domestic labor to produce different goods and services, as a result we all become more productive.
Not surprisingly, empirically this is what economists find: over the last 50 years the work force has grown dramatically, but unemployment rates have remained relatively constant. People currently see our high unemployment rate and blame the wrong cause. More labor, from foreign sources, will allow us to produce more at a lower cost. The high unemployment is due to our misguided monetary policy that produced malinvestment. Many are unemployed because producers are struggling to reallocate resources back to what consumers are actually demanding (see this article for more on this). If anything, the more immigrants who join the labor force the faster we can recover.
The problem, as Bastiat pointed out, really boils down to which group the law should care about, producers or consumers. As producers we desire goods on the market to be scarce because it means we can receive higher prices for them. As consumers we want the opposite. The two are critically opposed to one another. As a result only one can be for the betterment of society. And a wealthy society is one where individuals are able to satisfy as many of their desires as possible. This can only be done the more abundance there is. The answer then should be obvious when we think about it in this way.
One thing is clear: Bastiat was and still is very relevant. There should be no doubt Bastiat’s writings have had an important impact on the world and it is up to us to make sure he still continues to do so.