Student Of Liberty

XII. – DOES PROTECTION INCREASE THE RATE OF PAY?

With a given amount of capital and labor, a quantity of output is created that decreases in proportion to the number of obstacles it encounters.

Frédéric Bastiat
Economic Sophisms First Series.

I found this quote in an essay rich in important economic concepts on price (and wages) formation but also on the concept of division of labour first explained by Adam Smith and then detailed by David Ricardo. What I found interesting here is the methodological value of the reasoning.

Bastiat hereby uses the “ceteris paribus” clause (all other things being equal) which is of enormous importance for economic science. Indeed, the almost permanent impossibility to conduct experiences on the population while keeping a control sample that would allow to prove the efficiency or relevance of an economic policy implies that any thesis needs to be proven through reasoning only. Unfortunately, the basis for economics, be it the individual or society as a whole, is way too complex for the efficiency of an action to be proven right thanks to a successful application of it (there are always other parameters that could explain the positive or negative results). The “ceteris paribus” clause allows for reasoning to focus on a single aspect of an economic policy and, despite not allowing to assess a quantified result, it allows to anticipate the direction of the changes that can be initiated by a different policy.

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