Grasping Reality on TypePad, by Brad DeLong

It is really too bad the contest has already been won.

Somebody who wishes me ill sends me to some proof-texting from Daniel Klein and Carlotta Stern:

Daniel Klein and Charlotta Stern: Is There a Free-Market Economist in the House? The Policy Views of American Economic Association Members

Abstract: People often suppose or imply that free-market economists constitute a significant portion of all economists. We surveyed American Economic Association members and asked their views on 18 specific forms of government activism. We find that about 8 percent of AEA members can be considered supporters of free-market principles, and that less than 3 percent may be called strong supporters.... Even the average Republican AEA member is “middle-of-the-road,” not free-market....

Political economists are in general quite suspicious of governmental intervention. They see in it inconveniences of all kinds--a diminution of individual liberty, energy, prudence, and experience, which constitute the most precious resources of any society. Hence, it often happens that they oppose this intervention... -- Frédéric Bastiat ([1848])

In 1848, Bastiat’s statements were probably true. Nowadays they are not. Here we present evidence from a survey of American Economic Association (AEA) members showing that a large majority of economists are either generally favorable to or mixed on government intervention, and hence cannot be regarded as supporters of free-market principles. Based on our finding, we suggest that about 8 percent of AEA members can be considered supporters of free-market principles, and that less than 3 percent may be called strong supporters...

Would Daniel Klein and Carlotta classify Frederic Bastiat as a "free market economist"? The answer is "no."

Let's turn the microphone over to Frederic Bastiat:

(1) There is an article in the Constitution which states: "Society assists and encourages the development of labor.... through the establishment by the state, the departments, and the municipalities, of appropriate public works to employ idle hands..." As a temporary measure in a time of crisis, during a severe winter, this intervention on the part of the taxpayer could have good effects... as insurance. It adds nothing to the number of jobs nor to total wages, but it takes labor and wages from ordinary times and doles them out, at a loss it is true, in difficult times...

(2) For a nation, security is the greatest of blessings. If, to acquire it, a hundred thousand men must be mobilized, and a hundred million francs spent, I have nothing to say. It is an enjoyment bought at the price of a sacrifice...

(3) It is quite true that often, nearly always if you will, the government official renders an equivalent service to James Goodfellow. In this case there is... only an exchange... my argument is not in any way concerned with useful functions. I say this: If you wish to create a government office, prove its usefulness.... When James Goodfellow gives a hundred sous to a government official for a really useful service, this is exactly the same as when he gives a hundred sous to a shoemaker for a pair of shoes. It's a case of give-and-take, and the score is even...

(4) [L]ast year I was on the Finance Committee. Each time that one of our colleagues spoke of fixing at a moderate figure the salaries of the President of the Republic, of cabinet ministers, and of ambassadors, he would be told: "For the good of the service, we must surround certain offices with an aura of prestige and dignity. That is the way to attract to them men of merit.... A certain amount of ostentation in the ministerial and diplomatic salons is part of the machinery of constitutional governments, etc., etc..." Whether or not such arguments can be controverted, they certainly deserve serious scrutiny. They are based on the public interest, rightly or wrongly estimated; and, personally, I can make more of a case for them than many of our Catos, moved by a narrow spirit of niggardliness or jealousy...

(5) Should the state subsidize the arts?... [A]rts broaden, elevate, and poetize the soul of a nation; that they draw it away from material preoccupations, giving it a feeling for the beautiful, and thus react favorably on its manners, its customs, its morals, and even on its industry. One can ask where music would be in France without the Théâtre-Italien and the Conservatory; dramatic art without the Théâtre-Français... ask whether, without the centralization and consequently the subsidizing of the fine arts, there would have developed that exquisite taste which is the noble endowment of French labor and sends its products out over the whole world.... To these reasons and many others, whose power I do not contest, one can oppose many no less cogent. There is... a question of distributive justice. Do the rights of the legislator go so far as to allow him to dip into the wages of the artisan in order to supplement the profits of the artist?... I confess that I am one of those who think that the choice... should come from below, not from above, from the citizens, not from the legislator.... Returning to the fine arts, one can, I repeat, allege weighty reasons for and against the system of subsidization... in... this essay, I have no need either to set forth these reasons or to decide between them.... When it is a question of taxes [and subsidies], gentlemen, prove their usefulness by reasons with some foundation, but not with that lamentable assertion: "Public spending keeps the working class alive"...

(6) When a public expenditure is proposed, it must be examined on its own merits... a presumption of economic benefit is never appropriate for expenditures made by way of taxation. Why?... In the first place, justice always suffers from it somewhat. Since James Goodfellow has sweated to earn his hundred-sou piece... he is irritated... that the tax intervenes to take this satisfaction away from him and give it to someone else.... [I]t is up to those who levy the tax to give some good reasons for it.... If the state says to him: "I shall take a hundred sous from you to pay the policemen who relieve you of the necessity for guarding your own security, to pave the street you traverse every day, to pay the magistrate who sees to it that your property and your liberty are respected, to feed the soldier who defends our frontiers," James Goodfellow will pay without saying a word...

(7) Another species of spoilation is commercial fraud, a term which seems to me too limited... [when restricted to] the tradesman who changes his weights and measures... the physician who receives a fee for evil counsel, the lawyer who promotes litigation, etc.

So Frederic Bastiat is in favor of:

1. Stimulative expansionary fiscal policy to fight depressions,
2. large public expenditures for national security,
3. government provision of services that government can provide as cheaply and effectively as the private sector,
4. high salaries for public officials to attract workers of talent and energy and also to boost the prestige and dignity of the government,
5. subsidies for the arts to the extent that purlic subsidies properly elevate taste and aesthetic values,
6. public provision of police, justice, defense, transportation, and other infrastructure,
7. public regulations of professional practice a la the FDA in order to avoid "spoilation" by doctors and pharmaceutical companies that receive "a fee for evil counsel."

Let us be very clear: The key for Frederic Bastiat is whether Jacques Bonhomme receives good value for the government expenditures financed by his taxes. Bastiat does not care whether or not Jacques Bonhomme is "coerced" when he is taxed to pay for public schools, public roads, public theatres, government-run courts, government-paid police officers, government armies. He cares about whether the goods and services that the government provides are valuable ones. The key is whether Jacques Bonhomme receives good value for his private purchases--if not, if the physician or pharmaceutical company provides "evil counsel," then the government has the same duty to intervene via regulation as it does when confronted with fraud in weights and measures.

Klein and Stern say:

Many economists [falsely] maintain that they are essentially free-market supporters but recognize that externalities, asymmetric information, diminishing marginal utility of wealth, etc. call for exceptions.... A “natural rights” libertarian who has no economic understanding is nonetheless a supporter of free-market principles.... At the heart of such principles are private property rights and the freedom of contract.... When a survey respondent does not oppose such coercive government action, it is... a clear case of not supporting free-market principles.... [G]overnment ownership and production of schooling... government programs that draw on taxation and distort or crowd out private enterprise... to not oppose such government programs is to not support free-market principles.... The distinction between voluntary and coercive action is... the basis upon which we call certain cases “the free market” and certain policies “government intervention.” A clear understanding of the distinction is crucial to economics as a scientific enterprise...

We have gone beyond ideology into absurdity.

A definition of "free-market supporter" that excludes Frederic Bastiat from the set is not useful.