CUE CARD ECONOMICS: Economic Harmonies, and The Miracle of Breakfast

FRENCH EXISTENTIALIST PHILOSOPHER Jean Paul Sartre famously stated “Hell is other people,” and he wrote many books to prove it. 

Unfortunately, all he proved to most readers was that Hell is reading Jean Paul Sartre books.

A century earlier his countryman Frederic Bastiat discovered, argued and helped to prove something very different; that other people are the very opposite of hell. Said Bastiat in his own magnum opus Economic Harmonies:

“All men’s impulses, when motivated by legitimate self-interest, fall into a harmonious social pattern.”

This is the big lesson that economics can give to philosophers: that the world is not made up of the “fundamental antagonisms” between people that some philosophers find everywhere,

Between the property owner and the worker.
Between capital and labour.
Between the common people and the bourgeoisie.
Between agriculture and industry.
Between the farmer and the city-dweller.
Between the native-born and the foreigner.
Between the producer and the consumer.
Between civilization and the social order.

And, to sum it all up in a single phrase:

Between personal liberty and a harmonious social order.

What economics can teach philosophers (and what Bastiat can still teach economists) is that other human beings need neither be a burden nor a threat, neither a hell nor a horror but a blessing.

This is the greatest lesson economics can teach: that in a society making peaceful cooperation possible we each gain from the existence of others.

What a great story to tell!

TO START TO TELL THIS long story, a story that all of economics really serves to show, let’s begin with a short story—an excerpt, from a short story by a great short story writer: O. Henry. As his characters sit down in their wilds to break their fast with something “composed of fried bacon and a yellowish edifice that proved up something between pound cake and flexible sandstone,” they begin to reflect on The Perfect Breakfast:

Such a breakfast, they sigh, might only be possible in New York. "It's a great town for epicures.” As is virtually every city.  We take for granted now that in virtually every cafe in every city in the country we can sit down to the perfect breakfast. We reach over to Brazil or Kenya for our coffee and down to Christchurch for our mushrooms and rolls; to Pokeno, or Vermont, for our bacon and head further down to the Waikato to dig a slice of butter out of a Te Rapa urn and then turn over a beehive near a manuka patch in Nelson for our honey.

This is the Miracle of Breakfast: that we can eat like the gods for the cost only of a few dollars thanks to the freedom to trade, the division of labour and the 'invisible hand' of the market. And we take this for granted.  We take it so much for granted rather than celebrate sharing the meal gods eat on Olympia, we complain if our eggs are too cold.

And we don’t need long arms to enjoy it: we need the arms and minds of other people who are free to produce, free to trade, free to enjoy the fruits of their own labour by trading those fruits with others.

This is the lesson integrated by all of economics:  when you remove force and fraud people are a blessing rather than a curse. Thanks be to the freedom to trade, the division of labour and the 'invisible hand' of the market that makes it possible.

This is the great lesson of Economic Harmonies hinted at by Adam Smith, made explicit by our friend Frederic Bastiat, and developed in specific areas by the likes of Friedrich Hayek and Ludwig Von Mises. Bastiat first noticed it in a visit to Paris. Paris gets fed, he observed, yet no-one celebrates the miracle:

A light we term self-interest. It is this, says Bastiat, that is at the root of all the Harmonies.

Think about it. On our own we can produce barely anything in a single day.  If we were to permanently endure self-sufficiency or life in the wilds not only would the meal of ambrosia perpetually elude us, our lives would be one long round of much labour for very little reward.  We need others to keep us supplied as we now take for granted—with food, with drink, with iPods, iPads and the very roofs over our head—but how to enlist those others in our aid? Simple: we rely on trade. On voluntary cooperation. In short, we offer them their own profit in return for ours. We appeal to their own self-interest, a point made by Adam Smith in the part of his famous book where he invokes his most famous metaphor:

And so we do. By pursuing our own self-interest, through our production, our trade, our enterprise, we ensure “Paris gets fed.”

But there is no central planner here. That is the second part of this miracle: the “resourceful and secret power that governs the amazing regularity of such complicated movements” is not the result of government planning but the opposite: it is a naturally developed “spontaneous order” regulated by this “inner light” of self-interest and the power of free exchange.  That power, that light,  “is so illuminating, so constant, and so penetrating, when it is left free of every hindrance” it produces the order we take so much for granted.

This, Bastiat’s great lesson of spontaneous order, was taken up by Friedrich Hayek, observing society relies on the spontaneous order arising out of our voluntary cooperation.

This great miracle can only happen when each of us is free to follow our own road, to make use of our unique knowledge and circumstances to pursue our self-interests,  so promoting that of the society more effectually than when we really intend to promote it.

SO WHAT EXPLAINS THIS Miracle of Breakfast then? Bastiat’s conclusion in three points:

• Free exchange
• Self-interest
• Spontaneous order

Or in one idea:

“That the legitimate interests of mankind are essentially harmonious.”

This is the great lesson integrated by economics, if we are willing to hear it:

• That human interests do not require acts of sacrifice…
• That bettering the condition of one person does not necessitate the worsening of someone else’s…
• That one person’s wealth does not necessitate another person’s poverty….
• That the creation of wealth requires only that everyone mind their own business and get the hell on with it.
• That the interests of all members of society are harmonious if and insofar as private property rights are respected or, in modern parlance, that the unhampered market can operate independent of government intervention.

Mind you, it takes all of economics to prove the point. And most philosophers are unable to read, or integrate, that much. 

But so too are so many of today’s economists.