Friday, April 20, 2012

Producer and Consumer - Frédéric Bastiat - Pt 1

Producer and Consumer

If the standard of living of the human race is not constantly on the rise, man is not perfectible.
If the tendency of society is not continually to raise all men to this ever upward-moving standard of living, economic laws are not harmonious.
Now, how can the standard of living rise unless a given amount of labor yields increasing satisfactions, a phenomenon that can be explained only by the transforming of onerous utility into gratuitous utility?
And, on the other hand, how can this utility, when it has become gratuitous, raise all men to a common standard unless it at the same time becomes common wealth?
This, then is the essential law of social harmony.
I very much wish that the language of economics could supply me with two words to indicate services rendered and received other than the words “production” and “consumption,” which connote too much an exchange of materials. Obviously, there are services, like those of the priest, the teacher, the soldier, the artist, which promote morality, education, security, the enjoyment of the beautiful, and yet have nothing in common with industry, in the strict sense of the word, except in so far as their ultimate aim issatisfaction.
The words are in accepted usage, and I have no desire to indulge in neologisms. But at least let it be understood that by “production” I mean that which imparts utility, and by “consumption,” I mean the enjoyments that utility imparts.
Let the protectionist school—which is really a variety of communism—believe me when I say that in using the words “producer” and “consumer,” I am not so illogical as to imagine, as I have been accused of doing, that the human race is divided into two distinct classes, the one concerned only with producing and the other only with consuming. Just as the biologist may divide the human race into whites and blacks, men and women, so the economist may divide it into producers and consumers, because, as our esteemed friends the protectionists observe with great penetration, producer and consumer are one and the same person.
But precisely because they are one and same person, every man must be considered by the science of political economy in this double capacity. It is not a matter of dividing the human race into two parts, but of studying two very different aspects of man. If the protectionists were to forbid grammar to use thee and me on the ground that each one of us is in turn the one speaking and the one spoken to, we could remind them that, while it is perfectly true that we cannot put all the tongues on one side and all the ears on the other simply because we all have ears and a tongue, yet it does not follow that, as each phrase of a conversation is uttered, the tongue does not belong to one man and the ears to the other. Similarly, as each service is performed, the one rendering it is perfectly distinct from the one receiving it. Producer and consumer confront each other from opposite sides, so opposed, indeed, that they are constantly in dispute.
The same people who are unwilling for us to study man's self-interest from the double point of view of consumer and producer have no qualms about making this distinction when they speak to the legislative assembly. Then we see them demanding monopoly or free trade, depending on whether they are selling or buying the commodity in question.
Without, therefore, paying heed to the pleas of the protectionists that the case be thrown out of court, let us recognize that in the social order the division of labor has created for every person two roles so distinct from each other that their interplay merits our careful study.
In general, we devote ourselves to a trade, a profession, or career from which we do not expect to receive our satisfactions directly. We render and we receive services; we offer and we demand value; we make purchases and sales; we work for others, and others work for us; in a word, we are producers and consumers.
When we go to the market place, we have different, even opposite, points of view, depending on whether we go as consumers or producers. In the case of wheat, for example, the same man does not desire the same thing when he goes as a buyer as when he goes as a seller. As a buyer he hopes for abundance; as a seller, for scarcity. These hopes stem from the same source, self-interest; but as buying or selling, giving or receiving, supplying or demanding, are completely opposite actions, they cannot fail, though they have the same motivation, to give rise to conflicting desires.
Desires that clash cannot both simultaneously coincide with the general welfare. In another work1 I have tried to show that men's desires as consumers are the ones that are in harmony with the public interest, and it cannot be otherwise. Since satisfaction is the end and purpose of labor, since the amount of labor depends solely upon the obstacles it encounters, it is clear that labor is the evil, and that everything should be done to lessen it, while satisfaction is the boon, and that everything should be done to increase it.
Here we encounter the great, eternal, and deplorable fallacy that arises from the false definition of value and its confusion withutility.
Since value is merely the expression of a relation, the greater its importance for the individual, the less is its importance for all men collectively.
For all men collectively only utility matters; and value in no wise serves as its measure.
For the individual also, only utility matters. But value is its measure; since for each determinate value he contributes, he can obtain from society an equivalent measure of the utility of his choice.
If we consider man in isolation, it becomes as clear as day that consumption is the essential thing, and not production; consumption quite clearly implies labor, but labor does not imply consumption.
The division of labor led certain economists to measure the general welfare, not in terms of consumption, but in terms of labor. And by following their example, we have come to this strange reversal of principles, that we favor labor at the expense of its results.
This is the reasoning that has been followed:
The more obstacles that are overcome, the more value for us. Hence, let us multiply the obstacles that are in our way.
The flaw in this reasoning is very obvious.
Yes, undoubtedly, granted a given number of obstacles, it is a good thing for a given quantity of labor to be able to surmount as many of them as possible. But it is simply monstrous to decrease the effectiveness of labor or to increase the difficulties in its way in order to obtain more value.
The individual member of society wants to see his services, even though retaining the same degree of utility, increase in value. If his wishes are granted, it is easy to see what will happen. He will enjoy a better living, but his fellows will have less, since the total utility has not been increased.
We cannot, therefore, pass from the particular case to the general rule and say: Let us take such measures as will satisfy the desire of every individual for an increase in the value of his services.
Since value is purely relative, we should have accomplished nothing if the increase remained in every instance in proportion to previous value; if it were set arbitrarily and unequally for different services, we should do nothing but introduce injustice into our distribution of utilities.
It is characteristic of every commercial transaction to give rise to argument and discussion. Good heavens! What have I just said? Have I not called down on my head the wrath of all the sentimentalist schools, which are so numerous these days? Argument impliesantagonism, they will say to me. You therefore admit that antagonism is the natural state of society.
Once again I must stop to enter the lists against them. In our country the science of economics is so poorly understood that it is impossible to say a word without raising up an opponent.
I have been reproached, with reason, for having written this sentence: “Between buyer and seller there exists a fundamental antagonism.” The word “antagonism,” especially reinforced by the word “fundamental,” goes far beyond my intention. It appears to indicate a permanent hostility of interests, and consequently an ineradicable social discord, whereas I was merely referring to that short-lived argument, or discussion, which takes place before any bargain is made, and which is inherent in the very idea of a transaction.
As long as there remains, to the great chagrin of the sentimental utopian, the least vestige of liberty in this world, the seller and the buyer will argue for their interests, will haggle over their prices, will bargain, as the saying goes, and the laws governing the social order will not become the less harmonious on that account. Can we imagine that the one supplying a service and the one demandingit can come together without having momentarily divergent views on its value? And do we think that this is any world-shaking calamity? Either we must banish every transaction, every exchange, every act of barter, every vestige of liberty, from this earth, or we must recognize the right of each one of the contracting parties to defend his position, to make the most of his side of the argument. Indeed, this free debate, so often deplored, is in fact the means of establishing an equivalence of services and equity in transactions. How else will the social planners arrive at that equity that they desire so much? Will they shackle with their laws the freedom of one of the contracting parties? In that case he will be at the mercy of the other. Will they strip both parties of the power to determine their own interests on the pretext that henceforth they must sell and buy on the principle of brotherly love? But in that case I must say that what the socialists are proposing is nonsense, for in some way or other the respective interests of the parties to the transaction have to be determined. Will the bargaining take place in reverse, with the buyer presenting the seller's case, and vice versa? Such transactions would be highly entertaining, we must admit.
“Sir, pay me only ten francs for this piece of cloth.”
“What do you mean? I want to give you twenty francs.”
“But, sir, it's worthless; it's out of style; in two weeks it will be worn out,” says the merchant.
“It's of the best quality and will last two winters,” replies the customer.
“Very well, sir, just to make you happy, I'll add five francs to the price; that's the most brotherly love will let me do for you.”
“It goes against my socialist principles to pay less than twenty francs; but we all have to make sacrifices, and I accept.”
Thus, the weird transaction will come out in exactly the ordinary way, and the social planners will observe with regret that accursed liberty still surviving, although moving in the wrong direction and creating antagonisms in reverse.
“This is not what we want,” say the social planners; “this would be individualistic freedom.”
“What do you want, then? For services still have to be exchanged and their conditions determined.”
“We propose that their control be entrusted to us.”
“I thought so.”
Brotherhood! Sacred tie that joins soul to soul, divine spark come down from heaven into the hearts of men, how can thy name be thus taken in vain? In thy name it is proposed to stifle all freedom. In thy name it is proposed to erect a new despotism such as the world has never seen; and we may well fear that after serving as a protection for so many incompetents, as a cloak for so many ambitious schemers, as a bauble for so many who haughtily scorn human dignity, it will at last, discredited and with sullied name, lose its great and noble meaning.
Let us, therefore, not have the presumption to overthrow everything, to regulate everything, to seek to exempt all, men and things alike, from the operation of the laws to which they are naturally subject. Let us be content to leave the world as God made it. Let us not imagine that we, poor scribblers, are anything but more or less accurate observers. Let us not make ourselves ridiculous by proposing to change humanity, as if we stood apart from it and from its errors and shortcomings. Let us permit producer and consumer to have their respective interests, to discuss, debate, and settle their differences through fair and peaceful arrangements. Let us limit ourselves to observing their relations and the ensuing results. This is what I propose to do, and always in keeping with what I proclaim is the great law of human society: the gradual equalization of individuals and classes concomitant with general progress.

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