If growing rapeseed is in itself a sound activity, there is no need to give any supplementary profit to those who practice it. If it is unsound, the extra income does not make it sound.

Frédéric Bastiat
Complete Works, Volume 1, pages 461 to 480
July 1st, 1846

After exposing extensively his constitutional philosophy that consists, for good reasons, in limiting the powers of government, Frédéric Bastiat looks into a certain number of topics that he believes should remain in the private sphere (i.e., free from government intervention). The first of them is commercial freedom.

Today’s quote expresses in two sentences the quintessential reason for which subsidies should not exist. It is obvious that subsidies favour a fringe of the population, viz. those who produce the subsidised product. However, they are necessarily made to the detriment of those who pay for it, namely all other producers. An injustice (plunder) is thus created and the question that remains is if it can be justified (the argument according to which a new industry could not exist without protection is not looked into directly here).

We have seen in the Introduction to Economic Sophisms the issue of protection benefitting some to the expense of others but Frédéric Bastiat goes one step further here. The market price is the only information tool enabling to optimise the production of a country’s wealth. What subsidies do is to distort this market price (thus suppressing the necessary information for the optimisation of ressources utilisation) according to the whims of government although it is either not necessary for the producer or simply noxious.

Page 461 – Page 467 – Page 472 – Page 478

Leave a Reply

Your email address will not be published.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