In this way, the generosity of nature, like the advances made in production processes, is or constantly tends to become the common and free heritage of consumers, the masses, and the human race, in accordance with the law of competition.

Frédéric Bastiat
Economic Sophisms First Series.

William Nordhaus who won the Nobel Prize in Economics in 2018 estimates that innovators keep for themselves 2.2% of the surplus value created by their innovations. Thus, he is confirming what Bastiat was telling us as soon as July 1845, i.e., that consumers are the ones who benefit from producers’ innovations for free (or to the tune of 97.8% precisely).

It is also interesting to note that, in the quote above, Bastiat does not limit his assertion to the “advances made in production processes” but also adds the “generosity of nature”, which in his essay are clearly provided to the consumer through trade, or international trade if need be. As Donald Boudreaux explains clearly, there are no fundamental economic differences between trade (international trade is pedagogically more obvious but domestic trade works as well) and innovation. Frédéric Bastiat had understood this, as proven by this essay that reveals a number of clue to understand the importance of competition, international or not.

Leave a Reply

Your email address will not be published. Required fields are marked *