Therefore, certain writers, whose opinion has been biased by the sight of crushing and abusive taxation, have been wrong in considering as lost all values allocated to public services.

Frédéric Bastiat
Economic Harmonies

A quote in the footnote reveals that the author of this gross mistake is none other than Jean-Baptiste Say! To his credit, a second quote allows to minimise the extent of the mistake and highlights the circumstances in which taxes may not be plunder. It is obvious that public services may have value, even if, as we have seen, it is impossible to assess it correctly. Frédéric Bastiat mentions notably public education. Nowadays, teachers tend to be convinced that they are “underpaid” and a lot of taxpayers think that National Education is too costly – this is a perfect example of the difficulty there is in valuing the service! However, nobody really thinks that there is no value in it.

The mistake highlighted by today’s quote may have been amplified by the fact that the notion of value was not really understood before 1870. At the start of the 19th century, there were some theories that went as far as considering there was value in material goods only and that “pure” services such as commercial intermediation had none (in which case, public services that are not goods would not have had any value either).

However, while it is clear that value is not lost by the simple fact that a public service is financed by taxation, the opposite is not true either and it does not suffice to be a public service to create value. Frédéric Bastiat exposes here the Keynesian multiplier before it was born and that translated then in the trickle down theory. If today , this is criticised by those who think that trickle down theory is used to justify the wealth of rich people, it was then used to justify the wealth of public servants. If one considers that this theory explains that when someone spends his money, he helps the economy through money circulation, one really does not care if the spender is rich, poor or governmental. Yes, spending money increases the velocity of money, and thus, all other things being equal, increases one term of the PY=MV equivalence, i.e. the GDP. However, this does not show the causal effect because this equivalence allows only to assess correlation.

The question that remains open is how to define the circumstances under which the legitimacy of a public service will be assessed.

Other quotes from Private and Public Services:
Exchange – Value – Monopoly – Individual – Responsibility – Rights – Revolution – Ethics

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