Friday, July 1, 2011

Bastiat on Business - July 1, 2011

Economists like to point out the humor in the 'double thank you.' As in, when you buy a pizza, and you say "thank you" while the cashier also says "thank you." The truth is, nearly every transaction that occurs in our $36.5 trillion economy is mutually beneficial. You want the pizza more than your money, and the pizza maker wants your money more than the pizza.

Why then is the marketplace often depicted as a combative arena - employee vs. employer, buyer vs. seller, supply vs demand, etc? As Frederic Bastiat illustrates throughout Economic Harmonies, the free market is the most peaceful way to societal advancement. Think back on all of the transactions you have ever made in your life. Now compare those (and the value of those) to how many times you have been cheated. It is amazing that in, what could be argued to be mankind's most complicated creation, the market works nearly harmoniously.

In this Chapter, Bastiat looks at a main component of a free economy - the roles of both the producer and of the consumer. He illustrates that these are not opposing forces, but combined forces working toward satisfying each others' wants.

The Producer and the Consumer

Exerpt from "Economic Harmonies" by Frederic Bastiat
George B. de Huszar, trans. and W. Hayden Boyers, ed.
Published by: Foundation for Economic Education - Irvington-on-Hudson, New York

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 work 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.


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