Pure utilitarian · 1850
Bastiat
Economic Harmonies. Every exchange helps both sides, so free markets make every class's interests agree.
vs.
Eclectic utilitarian · 1848
Mill
Principles of Political Economy. Distribution is a human choice, so society can and should reform it.
The setting. By the 1840s socialist ideas built on Ricardo's labor theory were spreading fast, especially in France. Conservatives wanted an economics built on pure utility.
The pure answer. Bastiat pushed Bentham's pleasure principle to its logical end: economics is exchange, and exchange is always harmony.
The eclectic answer. Mill claimed both Bentham and Ricardo, then qualified each so much that, Hunt says, he ended up being neither.
"Exchange is political economy"
Hunt, ch. 8, pp. 176–185
His theoryWhat Bastiat argued
- Science and God. Economics observes like astronomy; socialism imagines like astrology. Laissez-faire is God's order.
- Two gains. Any exchange that happens proves both sides gained.
- Gratuitous vs. onerous utility. Nature's free gifts (water) are never priced. Utility that takes effort (diamonds) is.
- Service = pain. Productive effort by one person to satisfy another's want. Labor is just one kind; landlords and capitalists serve too.
- Property is natural. "Laws exist because there is property." Capital comes from foresight, intelligence, and thrift.
- Rent pays only for the landlord's improvements. Inheritance is sacred because fathers love their children.
- Government should only protect liberty, property, and individual rights. The answer to every social ill: freedom.
All exchanges benefit all parties.
All human interactions are exchanges.
∴ All interactions benefit all parties.
Hunt's critiqueWhere Hunt says it breaks
- Pain that isn't pain. Service is defined as suffering, yet lending money or letting land be used counts as service. Hunt: inconsistencies expose class bias.
- Invented history. Workers earn subsistence and can't save millions. Real fortunes came from fraud, coercion, and conquest, then inheritance.
- Love, not self-interest. His inheritance defense abandons his own self-interest premise.
- Who drains the fields? Peasants and wage workers did the improving, then paid rent to absentee landlords.
- The ignored exchange. Capitalists trade bribes to politicians for monopoly laws. Both sides gain; the public loses.
- Rate ≠ share. A falling profit rate doesn't mean a falling profit share. Try it in the lab below.
Test Bastiat's distribution "law"
Bastiat said that as capital piles up, the interest rate falls, so capital's share of output shrinks and labor's grows. Hunt says that only holds if output grows fast enough. We start with capital of 300 earning 10% on output of 100, so capital gets 30 and labor 70. Move the sliders.
Profit = capital × rate. Wages = output − profit. Example numbers for illustration; they are not in the book.
"Better to be a Socrates dissatisfied than a fool satisfied"
Hunt, ch. 8, pp. 185–200
Breaking with BenthamMill's philosophy and value theory
- Production vs. distribution. Production follows nature's laws. Distribution is "partly of human institution" and can change.
- Property is a human convention, judged by "general expediency." Exchange is just machinery, like roads and carriages.
- Two axioms rejected. Not all motives are self-interest, and some pleasures are higher than others (poetry beats pushpin).
- Value. Starts near Ricardo's labor theory, then slides back to Smith's adding-up cost of production: wages + profit + rent.
- Profit is both labor's surplus and Senior's "remuneration of abstinence," plus risk and supervision.
- Offer curves. His original trade theory: international prices settle where two countries' offer curves cross.
Wages, crises, socialismMill the reformer
- Wages fund. Accepted it in 1848; recanted in 1869. Wages are set by struggle, limited by profits minus capitalists' living costs.
- Falling profit rate is offset by exporting capital (like Marx and Lenin later) and by crises that destroy capital.
- Say's Law. Described boom-and-bust clearly, yet still defended Say's Law by calling a glut an "undersupply of money."
- Socialism is morally better than his era's capitalism, but workable only by "the elite of mankind" for now.
- Reforms: national education, union rights, child labor and hours limits, inheritance caps, regulating natural monopolies, poor relief on the 1834 principle.
Hunt's critique of MillHumane, but inconsistent
- Eclectic. His profit theory swings between Ricardo (profit from production) and Senior (profit from exchange).
- Surplus-capital puzzle. If spare capital can fund reforms for a whole generation, why is profit needed to reward abstinence?
- Why utilitarianism can't reform. It needs unanimity (one misanthrope breaks it), and self-interested politicians will sell laws to the rich.
- Improbable, not impossible. Because Mill dropped utilitarianism he could hope for a public-spirited politician. But in capitalism money is power.
Harmony or reform
| Topic | Bastiat (pure) | Mill (eclectic) |
|---|---|---|
| Core of economics | Exchange | Production and distribution |
| Private property | Natural, God-given | Human convention, judged by expediency |
| Origin of fortunes | Thrift and foresight | "Conquest and violence" |
| Value | Utility of services | Adding-up cost of production |
| Profit | Reward for capitalist's pain | Labor surplus and abstinence (inconsistent) |
| Pleasures | All self-interest | Some are higher |
| Classes | Harmony | Two hereditary classes can't last |
| Government | Liberty, property, rights only | Education, labor laws, inheritance limits |
| Legacy | Austrian and Chicago schools | Marshallian neoclassical economics |
The socialists Bastiat was answering
Babeuf1760–1797. Nature made people equal; commerce makes "lakes of gold for the few." Executed after a failed plot.
Saint-Simon1760–1825. Attacked the idle rich and selfish competition; wanted planned cooperative production.
FourierWorkers' cooperatives called phalanxes. Warned competition ends in monopoly.
Proudhon1809–1865. "Property is theft." Bastiat's most despised opponent.
Based on Hunt & Lautzenheiser, History of Economic Thought: A Critical Perspective (2011), ch. 8. ECO 4343 study aid.