 A Pedagogical Note on Bastiats Restraint of Trade - Journal of Private EnterpriseCategories: Education Spring 2012index.php?actionajaxrsGDMgetPagersargsSpring2012_8.pdfrsargs0TheJournalofPrivateEnterprise272,2012,144150APedagogicalNoteonBastiatsRestraintofTradeCecilE.BohanonBallStateUniversityAbstractFredricBastiatwasagreatexpositoroffreetrade.ThisnoteuseshisessayonRestraintofTradetodistinguishbetweenmarginalandinfra-marginalunitsofdomesticproductionthatareforthcomingwhenanembargoisimposedonanimportedproduct.ThisnotonlyclarifiesBastiatsanalysisbutalsoprovidesaspringboardforteachingthemarginalinfra-marginaldistinction.JELCodes:A20,B12,F11Keywords:FredricBastiat;Marginalanalysis;Tradetheory;EconomiceducationFredricBastiatswritingsarewell-regardedworksofclassicaleconomicexposition.Bastiatmadepowerful,succinct,andconvincingargumentsforfreemarkets.Yet,tothebestofanyonesknowledge,heneverdrewadiagram,scribedamathematicalequation,orcollectedadataset.Moreover,hispopularappealhasbeenpersistent.In1909BastiatsFallaciesofProtectionwasrepublished.ThebookrevieweditorattheJournalofPoliticalEconomydescribeditasbrilliantandfamousandhighlightedtheeditionsglowingintroductorynotebythenBritishPrimeMinisterH.H.Asquith.BookReviewandNotices,1909,pp.65253HenryHazlittsEconomicsinOneLesson,originallypublishedin1946,openlyandenthusiasticallyacknowledgesthebooksdebtstoBastiatHazlitt,1946.FriedrichHayekwrotetheintroductiontothe1964translationofBastiatsSelectedEssaysinPoliticalEconomy.1BastiatswritingsTheauthorwouldliketothankhiscolleaguesintheEconomicsDepartmentatBallState,twoanonymousreferees,andEdStringhamforhelpfulcomments.Allerrorsremainhissoleresponsibility.1HayeknotedthatJosephSchumpetercalledBastiatthemostbrillianteconomicjournalistwhoeverlived.HayekalsonotedSchumpetersharshassessmentofBastiatasnotatheoristBastiat,1995,p.ix.Indeed,Schumpeter1909,p.223dismissedBastiatasamongeconomistswhoseimportancewasnotverygreatandwasnowrapidlydeclining.AcenturylaterPaulSamuelsonmentionedBastiatina144index.php?actionajaxrsGDMgetPagersargsSpring2012_8.pdfrsargs1C.E.BohanonTheJournalofPrivateEnterprise272,2012,144150145continuetobewidelyavailable.Anewcollectionofhispreviouslytranslatedworksappearedin2007,andacollectionofsomeofhispreviouslyuntranslatedworkwasreleasedin2011Bastiat,2007,Bastiat,2011.ThepurposeofthisnoteistoexamineBastiatsessayRestraintofTradeasaclassroomexercise.AlthoughBastiatsbasicinsightiscorrect,hisanalysisisincompletebecausehedoesnotandperhapscouldnotdistinguishbetweenmarginalandinfra-marginalunits.WemayexcuseBastiat;afterall,marginalanalysiswasnotpartofthegeneralbodyofeconomicknowledgeinhistime.2Moreover,Bastiatsessayfocusedonchangesintheterms-of-tradeforasingleunitofconsumptionbyhisrepresentativecitizenJohnGoodfellow.Thiswasundoubtedlybecausehewasstrivingtomakeaclearandconvincingpointtoapopularaudience.Economicsinstructorscanempathizewiththedifficultyoftransitioningfromanalysisofasingleunittoanalysisofmultipleunits.Itispreciselythiskindofexpositionaldifficultythatisthejustificationformuchoftheanalyticalframeworkofundergraduateeconomics.Bastiatwouldsurelyapplaudhisexpositionbeingaspringboardtoemphasizetheimportanceofamorecompleteunderstandingofmicroeconomicsofinternationaltradeviamarginalanalysis!BastiatbeginshisanalysisfromtheperspectiveofaFrenchironmineownerfrustratedbythecompetitionfromlower-costBelgianmines.TheFrenchmineowner,aptlynamedMr.Protectionist,opines,BelgianironissoldinFranceattenfrancsperhundredkilogramwhichforcesmetosellmineatthesameprice.IshouldprefertosellmineatfifteenandcannotbecauseofthisconfoundedBelgianironBastiat,1995,p.28.Mr.ProtectionistfirstplanstogototheborderwithfourpistolsandacartridgeboxandkillanyonewhobringsironoreintoFrance.Onsecondthought,hedecidestogotothegreatlawfactoryinParisandgetanicelittlerejoindertohislastmajorpaperontradetheory;however,SamuelsonclearlydisparagedBastiatasanaïveadvocateoffreetrade.Yet,inthesameyearCaplanandStringham2005arguedthatBastiatstheoryofpoliticaleconomywasatthecuttingedgeofpublicchoiceanalysis.Sufficeittosay,Bastiatsreputationasatheoreticaleconomisthasbeenmuchmorecontroversialthanhisreputationasaneconomiceducatorandjournalist.2Interestingly,earlymarginalanalysiswasbeingdevelopedinFrancebyCournotandDupuitatthetimeBastiatwaswriting;seeEkelundandHebert,1999.Thereisnoevidencetothisauthorsknowledge,however,thatBastiathadbeenexposedtothiswork.index.php?actionajaxrsGDMgetPagersargsSpring2012_8.pdfrsargs2146C.E.BohanonTheJournalofPrivateEnterprise272,2012,144150lawsayingBelgianironisprohibitedBastiat,1995,p.28.Mr.ProtectionisttellsthelegislaturethatiftheyprohibitBelgianironsothatironpricesrisetofifteenfrancs,Ishallextendtheexploitationofmymines;Ishallemploymoremen.MyemployeesandIwillspendmore,togreatadvantageofoursuppliersallaroundus.Thesesuppliershavinggreatermarketwillgivemoreorderstoindustryandgraduallythisactivitywillspreadthroughoutthecountry.Bastiatthenreportsthat,Charmedbythisdiscourse,enchantedtolearnthatitissoeasytoincreasethewealthofpeoplesimplybylegislation,themanufactureroflawsvotedinfavoroftherestrictionBastiat,1995,p.29.ThesedetailsallowstudentstospecifyinitialconditionsintheFrenchironmarketaspresentedinFigure1.DdomesticistheFrenchdemand.SdomesticistheFrenchsupply.ThecurveSforeignrepresentsthesupplyofironfromBelgiumandassumesthatFranceisapricetakerintheironmarket.Initially,FranceproducesQxunitsofiron,consumesQyunitsofiron,andimportsQyQxunitsfromBelgium.Ironismeasuredin100-kilogramkgunits.Figure1alsorevealswhatoccursintheFrenchironmarketifthereisnoaccesstoBelgianiron.AutarkicequilibriumemergesatpointEtraderestrictionwithapriceofironoffifteenfrancsandaquantityofQZ.BastiatarguesthatthetraderestrictioncannotconferanetgaintotheFrencheconomy.HedoesthisbyintroducingahypotheticalbuyerofBelgianiron,JohnGoodfellow,whobuysoneunitofironbothbeforeandafterthetraderestriction.BeforeGoodfellowpaystenfrancsfortheiron,whereasafterGoodfellowpaysfifteenfrancs.Bastiatnotesthatthatthis:constitutesanadvantageforMr.Protectionistandarguesthat:...theprofitofMr.ProtectionistiscounterbalancedbythelossofJamesGoodfellow,andanythingthatMr.Protectionistwillbeabletodowiththisfive-francpiecefortheencouragementofdomesticindustry,JamesGoodfellowcouldalsohavedone.emphasisinoriginaltranslationBastiat,1995,p.29HethengoesontooutlinehowJamesGoodfellowuseshisfifteenfrancsbeforetheironembargo.Hisanalysisisrathersophisticated,forhenotesthatbychannelingtenFrenchfrancstoaBelgianironseller,GoodfellowisfacilitatingtheBelgiansabilitytoindex.php?actionajaxrsGDMgetPagersargsSpring2012_8.pdfrsargs3C.E.BohanonTheJournalofPrivateEnterprise272,2012,144150147buy10francsofFrenchgoodswhichBastiatspecifiesastenfrancsworthofFrenchmillinery.BastiatpointsoutthatGoodfellow:Figure1:BastiatsembargoofBelgianiron...stillhasfivefrancsleft.Hedoesnotthrowthemintotheriver,butandthisiswhatisnotseenhegivestosomemanufacturerorotherinexchangeforsomesatisfactionforexample,toapublisherforacopyoftheDiscourseonUniversalHistorybyBoussuet...Comesthedecree.JamesGoodfellow,ingivinghisfifteenfrancstothelastcentimetoMr.Protectionistforahundredkilogramsofiron,hasnothingTitle A Pedagogical Note on Bastiats Restraint of TradeAuthorsCreators: Cecil E. Bohanon, Ball State UniversityKeywords: Fredric Bastiat, Marginal analysis, Trade theory, Economic education, restraint of trade, domestic productionBohanon, Cecil E. 2012. A Pedagogical Note on Bastiats Restraint of Trade. The Journal of Private Enterprise, 272: 144-150. 