Which is preferable for man and for society, abundance or scarcity?
"What!" people may exclaim. "How can there be any question about it? Has anyone ever suggested, or is it possible to maintain, that scarcity is the basis of man's well-being?"
Yes, this has been suggested; yes, this has been maintained and is maintained every day, and I do not hesitate to say that the theory of scarcity is by far the most popular of all theories. It is the burden of conversations, newspaper articles, books, and political speeches; and, strange as it may seem, it is certain that political economy will not have completed its tasks and performed its practical function until it has popularized and established as indisputable this very simple proposition: "Wealth consists in an abundance of commodities."
Do we not hear it said every day: "Foreigners are going to flood us with their products"? Thus, people fear abundance.
Has not M. de Saint-Cricq [minister of commerce] said: "There is overproduction"? Thus, he was afraid of abundance.
Do not the workers wreck machines? Thus, they are afraid of overproduction, or—in other words—of abundance.
Has not M. Bugeaud [a member of the Chamber of Deputies] uttered these words: "Let bread be dear, and the farmer will be rich"? Now, bread can be dear only because it is scarce. Thus, M. Bugeaud was extolling scarcity.
Do not La Presse, Le Commerce, and the majority of the daily newspapers publish one or more articles every morning to prove to the Chambers [the legislature] and to the government that it is sound policy to legislate higher prices for everything through manipulation of the tariff? Do not the Chambers and the government every day comply with this injunction from the press? But tariffs raise the prices of things only because they reduce their supply in the market! Thus, the newspapers, the Chambers, and the government put the theory of scarcity into practice, and I was right to say that this theory is by far the most popular of all theories.
How does it happen that in the eyes of the workers, of publicists, and of statesmen, abundance seems dangerous and scarcity advantageous? I propose to trace this illusion to its source.
We observe that a man acquires wealth in proportion as he puts his labor to better account, that is to say, as he sells at a higher price. He sells at a higher price in proportion to the shortage, the scarcity, of the type of commodity produced by his labor. We conclude from this that, at least so far as he is concerned, scarcity enriches him. Applying this mode of reasoning successively to all workers, we deduce from it the theory of scarcity. Thereupon we proceed to put the theory into practice, and, in order to favor all producers, we artificially raise prices and cause a scarcity of all goods by restrictive and protectionist measures, the elimination of machinery, and other analogous means.
The same holds true of abundance. We observe that, when a product is plentiful, it sells at a low price; thus, the producer earns less. If all the producers are in this plight, they are all poverty-stricken; hence it is abundance that ruins society. And, as every person holding a theory seeks to put it into practice, one sees in many countries the laws of man warring against the abundance of things.
This sophism, phrased as a generalization, would perhaps make little impression; but, when applied to a particular set of facts—to this or that industry or to a given class of producers—it is extremely specious, and this is easily explained.
Man produces in order to consume. He is at once both producer and consumer. The argument that I have just set forth considers him only from the first of these points of view. From the second, the argument would lead to an opposite conclusion. Could we not say, in fact: The consumer becomes richer in proportion as he buys everything more cheaply; he buys thing more cheaply in proportion as they are abundant; hence, abundance enriches him; and this argument, extended to all consumers, would lead to the theory of abundance!
It is an imperfect understanding of the concept of exchange that produces these illusions. If we analyze the nature of our self-interest, we realize clearly that it is double. As sellers, we are interested in high prices and, consequently, in scarcity; as buyers, we are interested in low prices, or what amounts to the same thing, in an abundance of goods. We cannot, then, base our argument on one or the other of these two aspects of self-interest without determining beforehand which of the two coincides with and is identifiable with the general and permanent interest of the human race.
If man were a solitary animal, if he worked solely for himself, if he consumed directly the fruits of his labor—in short, if he did not engage in exchange—the theory of scarcity could never have been introduced into the world. It would be all too evident, in that case, that abundance would be advantageous for him, whatever its source, whether he owed it to his industriousness, to the ingenious tools and powerful machines that he had invented, to the fertility of the soil, to the liberality of Nature, or even to mysterious invasion of goods that the tide had carried from abroad and left on the shore.
No solitary man would ever conclude that, in order to make sure that his own labor had something to occupy it, he should break the tools that save him labor, neutralize the fertility of the soil, or return to the sea the goods it may have brought him. He would easily understand that labor is not an end in itself, but a means, and that it would be absurd to reject the end for fear of doing injury to the means. He would understand, too, that if he devotes two hours of the day to providing for his needs, any circumstance (machinery, the fertility of the soil, a gratuitous gift, no matter what) that saves him an hour of his labor, so long as the product is as great, puts that hour at his disposal and that he can devote it to improving his well-being. He would understand, in short, that a saving in labor is nothing else than progress.
But exchange hampers our view of so simple a truth. In society, with the division of labor that it entails, the production and the consumption of an object are not performed by the same individual. Each person comes to regard his labor no longer as a means, but as an end. Exchange creates, in relation to each object, two interests, that of its producer and that of its consumer; and these two interests are always directly opposed to each other. It is essential to analyze them and to study their nature.
Take the case of any producer. In what does his immediate self-interest consist? It consists in two things: (1) that the smallest possible number of persons engage in the same kind of labor as he; and (2) that the greatest possible number of persons be in quest of the product of his labor. Political economy expresses this more succinctly in these terms: that the supply be very limited and the demand very extensive; in still other terms: limited competition and unlimited market.
In what does the immediate self-interest of the consumer consist? That the supply of the product he wants be extensive and the demand limited.
Since these two interests are mutually incompatible, one of them must necessarily coincide with the social or general interest, and the other must be hostile to it. But which one should legislation favor, as being the expression of the public weal—if, indeed, it should favor either one of them? To know this, it suffices to discover what would happen if the secret desires of men were fulfilled.
Insofar as we are producers, it must be admitted, each of us has hopes that are antisocial. Are we vineyardists? We should be little displeased if all the vines in the world save ours were blighted by frost: this is the theory of scarcity. Are we the owners of ironworks? We want no other iron to be on the market but our own, whatever may be the public need for it, precisely because this need, keenly felt and incompletely satisfied, brings us a high price: this too is the theory of scarcity. Are we farmers? We say, with M. Bugeaud: Let bread be costly, that is to say, scarce, and the farmers will prosper: this is still the theory of scarcity.
Are we physicians? We cannot blind ourselves to the fact that certain physical improvements, such as better public sanitation, the development of such moral virtues as moderation and temperance, the progress of knowledge to the point at which everyone can take care of his own health, and the discovery of certain simple, easily applied remedies, would be just so many deadly blows struck at our profession. Insofar as we are physicians, our secret wishes are antisocial. I do not mean to say that physicians actually give expression to such wishes. I like to believe that they would welcome with joy the discovery of a universal cure; but it would not be as physicians, but as men and as Christians that they would yield to such an impulse: by a laudable act of self-abnegation, they would take the point of view of the consumer. But insofar as the physician practices a profession, insofar as he owes to that profession his well-being, his prestige, and even the means of supporting his family, it is impossible for his desires—or, if you will, his interests—not to be antisocial.
Do we make cotton textiles? We wish to sell them at the price that is most advantageous for us. We should heartily approve the proscription of all rival manufacturers; and though we do not dare to express this wish publicly or seek its full realization with any likelihood of success, we nevertheless attain it to a certain extent by roundabout means: for example, by excluding foreign textiles, so as to diminish the supply, and thereby to produce, by the use of force and to our profit, a scarcity of clothing.
In the same way, we could make a survey of all industries, and we should always find that producers, as such, have antisocial attitudes. "The merchant," says Montaigne, "prospers only by the extravagance of youth; the farmer, by the high cost of grain; the architect, by the decay of houses; officers of justice, by men's lawsuits and quarrels. Even the ministers of religion owe the honor and practice of their high calling to our death and our vices. No physician takes pleasure in the good health of even his friends; no soldier, in the peace of his country; and so it goes for the rest."
It follows that, if the secret wishes of each producer were realized, the world would speedily retrogress toward barbarism. The sail would take the place of steam, the oar would replace the sail, and it in turn would have to yield to the wagon, the latter to the mule, and the mule to the packman. Wool would ban cotton, cotton would ban wool, and so on, until the scarcity of all things made man himself disappear from the face of the earth.
If we now turn to consider the immediate self-interest of the consumer, we shall find that it is in perfect harmony with the general interest, that is, with what the well-being of mankind requires. When the buyer goes to the market, he wants to find it abundantly supplied. He wants the seasons to be propitious for all the crops; more and more wonderful inventions to bring a greater number of products and satisfactions within his reach; time and labor to be saved; distances to be wiped out; the spirit of peace and justice to permit lessening the burden of taxes; and tariff walls of every sort to fall. In all these respects, the immediate self-interest of the consumer follows a line parallel to that of the public interest. He may extend his secret wishes to fantastic or absurd lengths; yet they will not cease to be in conformity with the interests of his fellow man. He may wish that food and shelter, roof and hearth, education and morality, security and peace, strength and health, all be his without effort, without toil, and without limit, like the dust of the roads, the water of the stream, the air that surrounds us, and the sunlight that bathes us; and yet the realization of these wishes would in no way conflict with the good of society.
Perhaps people will say that, if these wishes were granted, the producer's labor would be more and more limited, and finally would cease for want of anything to occupy it. But why? Because, in this extreme hypothetical case, all imaginable wants and desires would be fully satisfied. Will someone tell me what reason there would be, on this hypothesis, to deplore the end of industrial production?
Allow me to emphasize, at the risk of repeating myself:
• There is a fundamental antagonism between the seller and the buyer.
• The former wants the goods on the market to be scarce, in short supply, and expensive.
• The latter wants them abundant, in plentiful supply, and cheap.
• Our laws, which should at least be neutral, take the side of the seller against the buyer, of the producer against the consumer, of high prices against low prices, of scarcity against abundance.
• They operate, if not intentionally, at least logically, on the assumption that a nation is rich when it is lacking in everything.
• For they say it is the producer who must be favored, by being assured a good market for his product. To achieve this end, it is necessary to raise its price; to raise its price, it is necessary to limit the supply; and to limit the supply is to create scarcity.
Just suppose that, at the present moment, when these laws are in force, a complete inventory were taken, not in terms of monetary value, but in terms of weight, size, volume, and quantity, of all objects existing in France that are capable of satisfying the wants and tastes of its people—meat, cloth, fuel, wheat, colonial products, etc. Suppose further that the following day all barriers to the importation of foreign goods into France were removed. Finally, suppose that, in order to determine the consequences of this reform, a second inventory is taken three months later.
Is it not true that there will be in France more wheat, livestock, cloth, linen, iron, coal, sugar, etc., at the time of the second inventory than at the time of the first?
Now, are we to believe that the people are better fed under the laws that prevail at present, because there is less bread, meat, and sugar in the country? Are they better clad, because there is less linen and woolen cloth? Are their houses better heated, because there is less coal? Is their labor made easier, because there is less iron and copper, or because there are fewer tools and machines?
But, you say, if foreigners flood us with their products, they will carry off our money! Well, what difference does that make? Men are not fed on cash, they do not clothe themselves with gold, nor do they heat their houses with silver. What difference does it make whether there is more or less money in the country, if there is more bread in the cupboard, more meat in the larder, more clothing in the wardrobe, and more wood in the woodshed?
Restrictive laws always present us with the same dilemma. Either we admit that they produce scarcity, or we do not admit it. If we do admit it, we thereby confess that they inflict upon the people all the harm that they can do. If we do not admit it, then we deny that they limit the supply of goods and raise their prices, and consequently we deny that they favor the producer.
Such laws are either injurious or ineffective. They cannot be useful.
Frédéric Bastiat was a student of political economy and a pamphleteer in France in the 1840s. This article is excerpted, by permission of the Institute for Humane Studies, from Economic Sophisms, translated and edited by Arthur Goddard (D. Van Nostrand, 1964). It is the first in an occasional REASON series of reprints of classical liberal writings.