frederic bastiat & the analysis of the state

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“great fiction,” Bastiat is, undoubtedly, not asserting that government is a non-existent institution

that, in actuality, has no effect on corporeal reality.Bastiat refers to government as a “great

fiction” due to the public’s unrealistic appraisal of government. Firstly, Bastiat characterizes the

public as viewing government as:

…a beneficent and inexhaustible being…which has bread for all mouths, workfor all hands, capital for all enterprises, credit for all projects, salve for allwounds, balm for all sufferings, advice for all perplexities, solutions for alldoubts, truths for all intellects, diversions for all that want them, milk for infancy,and wine for old age — which can provide for all our wants, satisfy all curiosity,correct all errors, repair all our faults, and exempt us henceforth from thenecessity for foresight, prudence, judgment, sagacity, experience, order, economy,temperance and activity.”3

Secondly, the public, Bastiat states, “…has two hopes… many benefits and no taxes. ”4 These

hopes are incompatible, but man can only deduce this if he understands that government is not

inexhaustible source of wealth, but rather a group of individuals that can only give with one han

what it takes with the other.5 Thus, the public’s view of government is a fantasy; the only

government that could possibly meet the public’s demands is one of fiction .

Having explained why Bastiat describes government as a fiction, the next task is to

explain why Bastiat considered government to be chiefly an institution“… through which

everybody endeavors to live at the expense of everybody else .” 6 Bastiat notes that man naturally

seeks to avoid suffering and pain, yet he must endure suffering in order to subside, unless he is

live off the work of others. Thus, man endeavors to live at other’s expense because this is the

3 Ibid. 97.

4 Ibid. 102. (Author’s emphasis).

5 Ibid. 99, 102.

6 Ibid. 99. (Author’s emphasis).



In light of the analysis, one can perceive that the expansion of government programs through

further tax and spend policies is identical to an expansion of“legal plunder ”, with tax-consumers

being the recipients of the loot derived from the labor of the net taxpayers.10 This legal plunder is

represented in necessarily redistributive policies, that is, government policies that confiscate an

allocate wealth in ways that consumers in the purely free market would not have approved

through their market-interactions.11 Redistributive policies replace the free market allocation of

wealth, determined by consumers, in favor of the political allocation of wealth, determined by

politicians.12 Political redistribution of wealth destroys the production-income nexus of

capitalism. Now, one is not forced to produce something that is valued by others in order to gainwealth. One simply has to clamor to politicians for enactment of one’s own favored

redistributionist policy in order to enjoy the earned income of others, resulting in a repudiation

consumer decisions in the market.

10 “But how is this legal plunder to be identified? Quite simply. See if the law takes from some personswhat belongs to them, and gives it to other persons to whom it does not belong…. Then abolish this law without-delay, for it is not only an evil itself, but also it is a fertile source for further evils because it invites reprisals. If sucha law… is not abolished immed iately, it will spread, multiply, and develop into a system.” Frédéric Bastiat, "TheLaw," (London: The Institute of Economic Affairs, 2001), 35.

11 The present author diverges from Robert Nozick’s classification of redistributive policies. Nozick statesthat “…‘redistributive’ applies to type of reasons for an arrangement, rather than to an arrangement itself. We mightelliptically call anarrangement ‘redistributive’ if its major (only possible) supporting reasons are themselvesredistributive. Finding compelling nonredistributive reasons would cause us to drop the label. Whether we say aninstitution that takes money from some and gives it to others is redistributive will depend uponwhy we think it doesso.” Robert Nozick, Anarchy, State, and Utopia , (US: Basic Books, Inc., 1974), 27.

“Redistributive” refers to the means of a policy that favors the political distribution of wealth over the

purely free market distribution of wealth determined by consumers, no matter the reasons for the policy. However, Nozick is correct in asserting that returning stolen money is not redistributive (Nozick, 27). See footnote 21 for aninterrelated analysis of why policies protecting person and property are not redistributive. However, if thegovernment is paid out of taxes to provide the service of returning stolen money or protecting persons from murderthis is to be considered redistributive. See discussion below in the section entitled “The Purely Free Market: T heImaginary Construction of a Non-CoerciveSociety.”

12 For a discussion of the consumer sovereignty of the free market, see Ludwig von Mises, Human Action ,The Scholar’s Edition, (Auburn: The Ludwig von Mises Institute, 2008), 241-242, 270-272, 605-606, 679-680.



The Usefulness of Bastiat’s Definition: Economic Analysis of Government Policy

At this point, Bastiat’s definition of government as “that great fiction, through which

everybody endeavors to live at the expense of everybody else” can be regarded as essentially

true. But how foundational is this definition of government? Does not government represent

more than just an engine of legal plunder? For instance,Bastiat’s definition fails to touch upon

what has been considered government’s longest standing role as a geographical monopolist and

regulator of legal violence. In his definition, Bastiat does not even attempt to define the proper

role of government. However, the attractivenessof Bastiat’s d efinition is not to be found in

looking for an explication of the legitimate ends of government. Rather, the efficacyof Bastiat’s

definition is that it applies regardless of the ends, legitimate or illegitimate, pursued by

government. This is because the definition captures the redistributive nature of the necessary

means of government. Even when government provides what many believe to be, at minimum,

the legitimate ends of government — national security, a justice system, and laws regulating the

use of violent force — it acts as a redistributionist body. Every program, due to its reliance on

coercion, inevitably involves taking from some persons“what belongs to them”, and giving it to

other persons to whom“it does not belong” in the form of government provided money, goods,

or services.13

Bastiat’s definition of government leads one to evaluate government through the well-

developed lens of cost-benefit analysis. It is one of the primary and most popular tasks of the

economist to engage in cost-benefit analysis when evaluating government policy. In order to

engage in cost-benefit analysis, the economist must obviously deduce the costs and the benefits

13 Bastiat, "The Law," 35.



associated with the specific policy. However, the only way to gain knowledge as to the benefits

and costs of a program is to first determinewho benefits andwho incurs the costs.

The layman can discover the benefits of any government program. The benefits are seen

in the form of that which is tangible, whether this is in the form of roads, schools, or food for th

poor. However, the costs associated with these programs are less visible. It is precisely the role

of the economist, in accordance withBastiat’s fundamental proposal in 1850, “… to avoid

judging of things bywhat is seen only, but to judge of them bythat which is not seen .”14 That is,

the economist must take into account both the benefits and costs, opportunity costs inclusive, of

any government action. It is the opportunity costs that are unseen, and it is the special role of th

economist to be able to elucidate the opportunity costs of any economic action, including

government intervention. The economist must first be able to visualize that which is never

actualized, a future that would have resulted if government action were not undertaken. Then, h

must demonstrate how the existence of government action alters reality from the course it woul

follow in its absolute absence. Economics is a science, but the use of economic intuition is an

art.15 The economist, guided by the apodictically valid theorems of economics, must artistically

paint a picture of the future, in fine brush strokes as to not omit any relevant detail, in order to

fully capture every cost and every benefit of a future that may never come to pass.16 His picture

14 Frédéric Bastiat, "That Which Is Seen, and That Which Is Not Seen," InThe Bastiat Collection, Second Edition, 1-48. (Auburn: The Ludwig von Mises Institute, 2007), 9.

15 “The art of economics consists in looking not merely at the immediate but at the longer effects of any actor policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” HenryHazlitt, "Economics in One Lesson, Fiftieth Anniversary Edition" (Baltimore: Laissez Faire Books, 1996), 5.

Hazlitt’s book is very much an explication and extension of Bastiat’s previous work “That Which Is Seenand That Which Is Not Seen.”

16 For a discussion of the epistemological basis and basic claims of the universally-valid anda prioriscience of human action, praxeology, of which economics is a part, see Ludwig von Mises, "The Task and Scope o



is comprehensible and accurate, yet remains, like a work of art or literature, a prototype of

reality, not reality itself. The foresight of the economist lays out the necessary general truths of

possible reality; the economist can predict, with certainty and precision, the qualitative effects o

a policy, but cannot,a priori , establish how quantitatively significant each effect will be in the

future, or at what moment in time each market force will most assert itself.17 The realization of

both the power and the limitations of general economic analysis are important if one is to

understand the scope and difficulties of cost-benefit analysis.

Bast iat’s Definition Applied : Analysis of Government Intervention

Having briefly analyzed the character of economic intuition and its product — economic

analysis —we are in a position to utilize this intuition to support Bastiat’s underlying claim that

government can only give to some groups what it takes from another group, that it is a fiction to

believe that all people in society can live at the net expense of others through the magical

blessings of government. Before such an analysis, it is helpful to emphasize thatall coercive

intervention into the purely free market, whether conducted by the government, a gang, or a loncriminal, necessitatesdiminishing one group’s money wealth or utility in order to raise another

group’s money wealth or utility. In addition, it is useful to classify different types of governmen

intervention: autistic, binary, and triangular intervention.18 “Austrian” economist Murray N.

the Science of Human Action," In Epistemological Problems of Economics , 1-69, (Auburn: The Ludwig von MisesInstitute, 2003), 13-18, 24-37; and Mises, Human Action , The Scholar’s Edition, 1-140. For interpretation of Mises’ sargument that economics is ana priori science, seeJörg Guido Hülsmann’s introduction to Mises’ s Epistemological

Problems of Economics : xliii-xlv; and Murray N. Rothbard, “In Defense of ‘Extreme Apriorism,’” Southern Economic Journal (January 1957): 314-20.

17 At best, the econometrician can forecast a quantitative interval for the effects of a policy utilizingempirical-historical data, but not without assuming that the past is necessarily an accurate predictor of the future.

18 Murray N. Rothbard, Man, Economy, and State with Power and Market, Scholar's Edition, (Auburn:The Ludwig von Mises Institute, 2009), 1057-1061. For detailed analysis of many policies categorized by theirintervention-type, see Rothbard, 1075-1295.



Rothbard, in Power and Market , defined these scientific classifications of coercive intervention

in the following way:

Autistic intervention occurs when the invader coerces a subject without receivingany good or service in return. Widely disparate types of autistic intervention are:homicide, assault, and compulsory enforcement or prohibition of any salute,speech, or religious observance…. Binary intervention occurs when the invaderforces the subject to make an exchange or unilateral “gift” of some good orservice to the invader. Highway robbery and taxes are examples of binaryintervention, as are conscription and compulsory jury service. Whether the binaryhegemonic relation is a coerced “gift” or a coerced exchange does not reallymatter a great deal. The only difference is in the type of coercion involved.Slavery, of course, is usually a coercedexchange , since the slaveowner mustsupply his slaves with subsistence…. A triangular intervention…occurs when theinvader compels a pair of people to make an exchange or prohibits them fromdoing so. Thus, the intervener can prohibit the sale of a certain product or can prohibit a sale above or below a certain price. We can therefore divide triangularintervention into two types: price control , which deals in the terms of exchange,and product control , which deals with the nature of the product or of the producer.19

I: Autistic Intervention

Equipped with these classifications, we can now analyze how each type of government

intervention into the purely free market results in redistribution of wealth, with wealth defined a

money and/or utility. The first types of intervention are autistic. Autistic intervention occurs

when a coercive power restricts an individual’s use of his person or property outside of

exchange. Every autistic intervention of government results in a decrease in utility of one group

The intellectual influence of Bastiat on Rothbard is apparent in more than just his published works.Between 1953-1959, Rothbard was the so-called leader of a group of intellectual friends who met regularly atRothbard’s apartment in Manhattan under the self -given name “The Circle Bastiat.” (David Gordon, The CircleBastiat on The Circle Bastiat blog, http://bastiat.mises.org/2012/03/the-circle-bastiat/ (accessed on January 10,2013).

19 Ibid . 1059, 1075.



and an increase of utility for another group.20 Such policies can be labeled redistributive because

they alter the utility-configuration of society in ways that consumers in the purely free market

would not have demonstrated approval through their market-interactions. Instead, the

demonstrated policy preferences of politicians result in one group gaining utility at the expense

of another group’s loss in utility.

One example of an autistic intervention is compulsory prohibition of certain religious

practices.21 When religious practices are coercively prohibited, the would-be religious

practitioners lose utility, while another group of individuals hostile to these religious practices

gain more in utility than they would have had this prohibition not been enacted. Another form oautistic intervention is a prohibition or regulation of political speech. The would-be political

speakers affected by the policy lose utility, while another group of individuals that finds the

particular form of political speech abhorrent gains in utility. In summary, all autistic

20

When a policy results in an increase in the utility of a group, this means that individuals comprising thespecified group gain a greater amount of satisfaction than they otherwise would in the purely free market where the policy would not be in place. Similarly, a policy that results in a decrease in the utility of a groups means thatindividuals comprising the specified group gain a lesser amount of satisfaction than they otherwise would if the policy were not put into place.

Knowledge of the economic concept of subjective utility is necessary in order to understand the analysis. Iis not to be confused with varying moral definitions of utility. For a brief and clear discussion of the subjectivetheory of economic value/utility, see Thomas C. Taylor, An Introduction to Austrian Economics , (Auburn: TheLudwig von Mises Institute, 2008), 40-41; and Mises, Human Action , 120-27.

21 The necessary and sufficient condition of a purely free market society is absolute respect for eachindividual’s body and priva te property. Notice that this condition does not allow for coercive autistic interventions

such as the restriction of religious practices. Thus, a restriction of religious practices results in a different utility-configuration than would be determined by consumers in a purely free market society. In contrast, consider thecompulsory prohibition of murder. The prohibition of murder results in a loss of utility for the would-be murderersand an increase in utility for the would-be victims if the prohibition were not in place. This cannot be considered anautistic intervention into the market, but rather an autistic policy that supports the purely free market. Thus, the

policy cannot be considered “redistributive” in the sense that the present author has defined the word as “…policiesthat confiscate and allocate wealth in ways that consumersin the purely free market would not have demonstratedapproval through their market-interactions” (3 -4). This is because the existence of a purely free market society presupposes respect for each person’s physical integrity.



interventions, such as prohibitions of political speech and religious practices, involve a

redistribution of utility, but not necessarily property.

II. Binary Intervention

The second form of intervention is binary intervention. Binary intervention occurs when

an intervener enforces a coerced exchange between an individual and himself. Every binary

intervention of government results in a decrease in the money wealth of one group and an

increase in the money wealth of another group.22 Such policies can be labeled redistributive

because they alter the money and utility-configuration of society in ways that consumers in the

purely free market would not have demonstrated approval through their market-interactions.Instead, the demonstrated policy preferences of politicians result in one group gaining wealth at

the expense of another group’ s diminution in wealth. Binary intervention falls under two general

forms: expropriation of value and expenditure. These two forms of binary intervention can, in

particular cases, be evaluated independently as long as one keeps in mind that, in actuality, the

process of expenditure is dependent upon expropriation of value.23

The first general form of binary intervention is expropriation of value. Expropriation of

value can occur in three physical forms: property confiscation, money expropriation, and

22 Since money is an object with an associated positive utility for all money holders and users, everyredistribution of money wealth implies a concurrent change in the utility-configuration of money holders and usersin society. A gain in money implies a gain in utility, and a loss in money implies a loss in utility. If money were an

object of disutility for an individual, he would simply abandon his money freely and refuse to hold and use money.Thus, the present author is correct in stating that all money holders and users in a purely free market society mustnecessarily associate positive utility with an increase in money-wealth. Whether these holders of money spendincreases in money on themselves or for the direct benefit of others makes no economic difference.

23 For example, one can analyze the economic effects of the binary intervention of income taxation withoutanalyzing how the taxes are spent, just as one can analyze the binary intervention of a subsidy without reference tohow the funds for the subsidy were attained. However, any analysis of a real-world policy proposal will need toconsider both processes of binary intervention if it is to be comprehensive in character.



currency manipulation. Applied to government institutions, these three forms of value

expropriation are known as eminent domain, taxation, and inflation.24

Eminent domain involves coercive property confiscation, with or without what the

governing body determines to be“fair compensation.” The only time that eminent domain comes

into practice is when an individual refuses to voluntarily exchange his property with the

government for a price offered by the government. Thus, eminent domain is not enacted unless

the individual whose property is to be confiscated does not expect to profit by the previous

proffered terms of non-coercive exchange.25 Therefore, eminent domain results in a decrease in

utility for the individual who had his property coercively confiscated while increasing the utilityof the government officials and private individuals who support the confiscation.

Taxation is the coercive expropriation of money and is regarded as the chief source of

government revenue. Coercive expropriation is only used as a means for raising revenues when

expropriators cannot obtain funds non-coercively from individuals. Taxation always has a two-

fold effect: First, taxation distorts the allocations of wealth in society from those allocations tha

consumers have or would have determined in a purely free market, and second, it severs the

production-income, or production-distribution, nexus of the purely free market and creates the

problem of political distribution of wealth.26 In other words, all taxation is necessarily

redistributive.

24 Here I part with Rothbard, who considers the right of eminent domain to be a form of triangularintervention. Rothbard, 1139-41.

25 For discussion of profit and loss as primarily psychical phenomena, see Mises, Human Action , 97-98,205-06.

26 Rothbard, 1154.



One example of taxation is proportional income taxation. Income taxation acts as a

penalty to productive activity. In other words, it is a penalty on service to the consumer, since a

incomes are ultimately determined by consumer “dollar votes” in a purely free market. Quite

obviously, the immediate effect of the taxation is to diminish the income of producers.

Consequently, penalizing producers for servicing consumers reduces the utility that a producer

associates with increasing the quantity or quality of service to consumers because it reduces the

additional, or marginal, utility producers associate with an increase in income because the State

will confiscate a fraction of these increased earnings. Therefore, producers will not value

increasing the value of production as much as they would in the purely free market, and thistranslates into a cost born by consumers in the form of higher prices and/or lower quality goods

than would exist without the imposition of the income taxation. The only people that

economically benefit from the income tax are those who receive funds derived from the tax.

The third type of expropriation of value is inflation. Inflation is simply an increase in the

supply of money, and this increase in the supply of money induces a decrease in the purchasing

power of each monetary unit, resulting in a rise in prices known as price-inflation. Individuals

with fixed nominal incomes or nominal incomes that rise less quickly than the level of price-

inflation are hit with a hidden tax in the form of a reduced real income. In simpler terms, these

individuals are not able to buy as many goods and services at the same quality as they had been

able to buy before inflation.

But how is inflation redistributive? Inflation is redistributive because it benefits a specifi

group of individuals and hurts another group of individuals precisely because all prices in the

economy do not simultaneously adjust in response to the increase in the monetary base. Inflatio

benefits those who first receive the injection of credit into the economy and worsens the



conditions of those who are last to gain access to the new credit that has circulated throughout

the economic system.27 Given the current banking structure in the United States, the groups and

institutions that are likely to, in the short-term, benefit from inflation are banks, large

corporations, government officials and contractors, and borrowers because these are the entities

that are likely to first receive new credit or benefit from the interest rate-reducing effect of

increases in the money supply.28

Why do those who first receive new credit benefit from inflation? These groups benefit

because they are able to spend this new money before prices in the market have risen, for the

prices will not begin to rise until the new money makes its way throughout the economy. Theseholders of new money will, in effect, be able to buy items in the market without having

produced, that is, without having satisfied consumers. These holders of new money, with their

wealth suddenly increased, will be willing and able to buy more products at higher prices

because the marginal utility of money for these holders has decreased. Those producers who fir

interact with the holders of new credit will also reap a benefit because they will be able to raise

the prices of their products quicker than the other producers in the economy who have not yet

27 “It [inflation] c an only benefit a part of the community at the cost of a corresponding loss by the other part….The cost must be borne by those classes or countries that are the last to be reached by the fall in the value ofmoney.” Ludwig von Mises, The Theory of Money and Credit , (Auburn: The Ludwig von Mises Institute, 2009),208.

28 For discussion of the Austrian business cycle theory which posits that, in the longer run, inflation leads todistorted interest rates which are the source of boom-bust cycles, see Mises, A Theory of Money and Credit , 359-365; F.A. Hayek, “Monetary Theory and the Trade Cycle,” In Prices and Production and Other Works , 1-130,(Auburn: The Ludwig von Mises Institute, 2008), 73-125;F.A. Hayek, “Prices and Production,” In Prices and

Production and Other Works, 189-329, (Auburn: The Ludwig von Mises Institute, 2008), 265-273; and Rothbard, Man, Economy, and State with Power and Market , 994-1008. For a more recent treatment utilizing empirical data,

see Joseph T. Salerno, “A Reformulation of Austrian Business Cycle Theory in Light of the Financial Crisis,” TheQuarterly Journal of Austrian Economics (Spring 2012): 3-44. For a mainstream research approach that lends somecredence to the Austrian theory of the business cycle, see Òscar Jordà, Moritz Schularick, and Alan M. Taylor,“Financial Crises, Credit Booms, and External Imbalances: 140 Years of Lessons,” NBER Working Paper No.16567 (December 2010).



been confronted with the newly circulated credit. This process will continue until the effect of

inflation, price-inflation, is encountered by the group of individuals who have not yet

encountered the new credit. Eventually, the new credit will reach their hands, but not until after

they have experienced a loss in their real wealth as effected by the price-inflation in the

economy. Thus, the groups that receive the new money first gain wealth at the expense of those

who are last to receive the new money.

The second general form of binary intervention is expenditure. Expenditure cannot occu

without the previous raising of revenues. If revenue for expenditure is raised through

expropriation of value, then expenditure implies redistribution of wealth. Expenditure, of courscan occur from revenues non-coercively obtained. Expenditure out of this revenue would not b

considered redistributive insofar as such expenditure would occur in the purely free market.

Suffice to say, the government relies upon expropriation of value to finance expenditure that

would not be made in the purely free market, and this is the type of expenditure that is classifie

as a binary intervention. Having independently analyzed the redistributive nature of

expropriation of value, the redistributive nature of expenditures made possible by these

expropriations can now be independently analyzed.

Government subsidy is the first form of government expenditure. Subsidies only occur if

the body receiving the subsidy would not have received those same funds from consumers in th

purely free market; otherwise, the practice of subsidy would be superfluous and not achieve an

unique aim other than a futile exercise in power. Either way, it is practically certain that even if

firm could have obtained the same revenues in the purely free market, these revenues would hav

been derived from different individuals than those who have had their earned value expropriate

by government in order to fund the subsidy. Thus, subsidies are necessarily redistributive.



In a purely free market economy, the firms most efficient at producing value for

consumers succeed while those firms that are inefficient fail. As inefficient firms go out of

business and liquidate their assets, these assets are transferred from these inefficient and less

value-productive firms to more efficient and more value-productive firms looking to expand

business. However, when subsidy enters the picture, inefficient firms are able to succeed insofa

as they are able to obtain government subsidy. Efficient firms that would have profited from the

purchase of the assets of less efficient and now subsidized firms are now unable to obtain these

assets because the inefficient firms remain in business, held up by the crutches of government

subsidies. In short, efficient firms are punished for the benefit of the inefficient firms.Consequently, consumers are hurt by the inefficient firms continued existence because the

subsistence of the inefficient firm means that resources are locked into less than optimal value-

productive uses.

In addition to these effects, Professor Rothbard notes a less obvious economic cost to be

associated with subsidies: “the diversion of energy from production to politics.” 29 Not only

energy, but funds will be diverted from investing in production to investing in lobbyists, politic

parties, and politicians in the hopes of receiving special privileges from government. The

existence of government subsidies “…opens the way to an allocation of wealth in accordance

with the ability of a person or group to gain control of the State apparatus.”30 In summary,

subsidies redistribute wealth from consumers and efficient producers to inefficient producers an

political bodies.

29 Rothbard, 1256.

30 Ibid. 1255.



Another form of government expenditure is the resource-using activities of government.

All resource-using activities of government allocate wealth in ways that consumers in the purel

free market would not have approved through their market-interactions. This is because

government entities lack the tool of economic calculation: profit and loss. Without the tool of

economic calculation, there is no rational basis for determining what the optimal supply of a

specific good or service is in society. There is no pricing mechanism to coordinate the system. I

a purely free market, services and goods are provided by producers insofar as, in the long term,

these producers are at least breaking even, that is, making zero or positive profit. Firms abandon

production activities that result in long run losses. However, government has no way of telling it is allocating resources efficiently, for its funds are derived through coercive expropriation

rather than the non-coerced transactions of the purely free market. Having no way to determine

the optimal output, which is equal to the output-level of the purely free market, government

programs are inevitably redistributive. These programs shift wealth from people who would no

fund these activities, now undertaken by government, in the purely free market to government

employees working to provide these services. Public education and the maintenance of public

parks are only two of the thousands of government activities that can be classified as resource-

using government activities.

III. Triangular Intervention

The third and final form of intervention is triangular intervention. Triangular intervention

occurs when an intervener compels, prohibits, or in some way regulates an exchange between a

pair of individuals. Every triangular intervention of government results in a decrease in the

money wealth of one group and an increase in the money wealth of another group. Such policie

can be labeled redistributive because they alter the money and utility-configuration of society in



ways that consumers in the purely free market would not have demonstrated approval through

their market-interactions. Instead, the demonstrated policy preferences of politicians result in on

group gaining wealth at the expense of another group’s diminution in wealth. Triangular

intervention involves either price control or product control.

Price control occurs when an intervener establishes the minimum selling price, the

maximum selling price, or an exact price for an item or service sold in the market. In addition,

price controls may be either ineffective or effective. If the government specifies that a gallon of

milk must not sell for less than $0.25, and the current market value for a gallon of milk

consistently varies between $3.00 and $4.00, the price floor will be ineffective, that is, it will no

effect the decisions of consumers and producers in the market. The price floor will be irrelevant

and thus it will not be redistributive. Similarly, if the government mandates that no gallon of

gasoline be sold for more than $80, and the market price for gasoline is relatively stable at $3.7

per gallon, then the price ceiling will be ineffective. The important cases of price control to

consider are price floors set above the market price and price ceilings set below the market pric

As will be seen, both forms of effective price controls strip the market of its natural rationing

function which depends upon the flexibility of prices.

Price floors set above the market equilibrium price of a good will result in unsold

surpluses. That is, the quantity of the good supplied by producers will exceed the quantity

demanded by consumers. The quantity supplied will be greater than what it would be in the

purely free market because entrepreneurs are induced to shift resources into the market due to t

artificially higher price. However, this higher price also decreases the amount of consumers

willing and able to buy the product, thus decreasing the quantity demanded. Overproduction in

the industry occurs and firms that are unable to sell their output suffer losses unless the



government buys the excess product. A policy of government purchasing of surpluses at a set

minimum price will tend to exacerbate the surplus over time. Either way, effective price floors

are redistributive because they cause the movement of resources from other industries into an

industry which is not as value-productive to consumers as the price-level in the industry

suggests. In addition, if government tries to solve the issue by buying the surpluses, then furthe

redistribution occurs as more products are politically allocated by the government.

Two popular forms of price floors are minimum prices for agricultural products and

minimum wage policies. Minimum prices for agricultural products redistribute wealth from

other industries into agricultural industries. Governments may engage in buying surpluses, whic

redistributes wealth from those paying the taxes to fund the governments expenditure to those

employed in the agricultural industry. Minimum wage policies, on the other hand, lead to a

surplus of labor known as unemployment. If all sectors of the economy must abide by a

minimum wage policy, permanent unemployment will persist. On the other hand, if one sector o

the economy is not covered by minimum wage policies, laborers displaced by the minimum

wage in the covered sector will likely seek employment in the uncovered sector. This increases

the supply of laborers in this uncovered sector and results in the reduction of real wage rate in

this sector. Thus, the minimum wage policy reduces the wealth of those who are employed in th

uncovered sector and those who would find employment in the covered sector were it not for th

minimum wage policy, while resulting in an increase in wealth for those who are able to get a

job at the minimum wage.

Price ceilings set below the market equilibrium price of a good will result in shortages.

That is, the quantity of the good supplied by producers will be less than the quantity demanded

by consumers. The quantity supplied will be less than what it would be in the purely free marke



because entrepreneurs are induced to shift resources out of the market due to the artificially

lower price. However, this lower price also increases the amount of consumers willing and able

to buy the product, thus increasing the quantity demanded. Shortages occur and consumers

obtain goods based on a“first come, first serve” basis, unless an alternate form of rationing, such

as government rationing, is implemented. Either way, effective price ceilings are redistributive

because they cause the movement of resources out of one industry into industries that are not a

value-productive to consumers, in actuality. In addition, in the absence of government rationing

those consumers that come first to market gain at the expense of those who are last to market.

Lastly, price ceilings stimulate black markets for the regulated product, where, since the supplyis limited in the legal market, black marketeers are able to charge higher prices than would be

established on the purely free market. Thus, wealth is also redistributed from those who would

legally produce and sell in the purely free market to those who illegally produce and sell in the

black market.

A form of price ceiling would be a maximum price on gasoline below the market price.

At a lower than market price, a gas shortage would occur and prices would lose their rationing

function. To aid the people, the government may try to ration the smaller supply of oil. No matt

the government’s action or inaction, a price ceiling below the market equilibrium price hurts

consumers and is a redistributive policy.

Product control occurs when government regulates or prohibits the selling of a product,

or when the government grants monopolistic privileges to some producers in order to prohibit

other producers from entering the market and competing with the privileged producers. Product

prohibition hurts both producers and consumers. Producers are unable to produce in a market



that, if legalized, would result in profitable enterprise. Consumers are not able to consume a

product that they desire, and thus suffer a decrease in utility.

Who benefits from product prohibition? Three groups: those who find the production and

consumption of the product abhorrent, individuals employed in new government task forces, an

black market producers. Government task forces aimed at enforcing the product prohibition

come into being and provide an increase in government workers. These workers benefit from th

existence of the prohibition. In addition, the illegalization of the market for the product creates

an incentive for a black market to operate and expand. The cost of product prohibition is

increased profitability in the black market for that product. This increased profitability will

induce more black market firms to enter the market. This then results in costs to police forces

who try to crack down on the illegal trade of the product. As police forces crack down, less and

less black market "firms" will remain in the industry. However, this is counterproductive. Less

competition leads to more price control by the firms still remaining in the black market. These

illegal firms have their profits increased due to an increase in prices and market share, and they

can plunge these profits into programs aimed at discovering and creating innovative and

secretive methods of distribution, and these methods make future police work more difficult an

more costly if such police work is to be effective. Popular forms of product prohibition include

drug prohibition and the prohibition of certain weaponry.

Product regulation is another form of product prohibition. It is prohibition of a certain

method of production or the production of a product lacking certain quality or safety standards.

Products that have to meet minimum quality and safety standards are likely to be more costly

than products that do not have to achieve these same standards. Thus, regulation of the product

increases the costs of production, therefore reducing supply and increasing the price on the



market. This in turn leads to less consumers being willing and able to buy the product. Therefor

product regulation results in a decrease in utility for producers who could profit from producing

a product that fails to meet government standards and a decrease in utility for consumers who

would be willing and able to buy the lower quality and cheaper good. After a product is

regulated, some firms may no longer find it profitable to produce the product. Thus, safety and

quality standards lead to a barrier to entry into the market place and benefit those firms that can

handle the increased costs due to their more efficient production methods and/or economies of

scale. In addition, if the regulations are sufficiently restrictive, a black market in products that d

not meet government requirements may thrive.

The last form of product control is the granting of monopolistic privileges that give some

firms the exclusive legal right to produce or sell a particular product to supply a particular

service. Examples of monopolistic privileges include government licensing and immigration

laws. Government licensing is a barrier to entry into certain industries. Those producers who ar

unable to obtain the license but would have been able to produce in a purely free market suffer

loss of wealth while those able to obtain the license gain in wealth because they can charge

higher prices due to the lower supply of the good or service resulting from a more restricted lev

of competition. Consumers also suffer a loss as they must now pay a higher price for these good

and services.

Another less obvious form of monopolistic privilege results from restrictive immigration

policies.31 In a free market economy, wage rates associated with the same work have a tendency

to equalize across all regions of world. However, this equalization is dependent upon businesse

31 Rothbard, 1107-1111.



moving from high-wage regions to low-wage regions and wage-earners in low-wage regions

moving to high-wage regions. Immigration laws restrict the movement of labor from low-wage

areas to high-wage areas, and thus acts as a restrictionist policy that protects the wage-earners i

high-wage areas that would otherwise have to compete with an influx of workers from low-wag

regions. Therefore, immigration restrictions lower the wealth of the would-be immigrants and

increases the wealth of those protected within the high-wage region.

In summary, it has been shown that all government interventions, whether autistic,

binary, and triangular, are redistributive. The redistributive effects are found by comparing wha

is commonly seen — the benefits of each program — with what is unseen — the opportunity costs —

of every government intervention. The exploration of each type of intervention, with specific

examples,demonstrates the efficacy of Bastiat’s definition and subsequent explication of

government as redistributive in nature. The assertion that all government policy involves the

confiscation and allocation wealth in ways that consumers in the purely free market would not

have approved through their market-interactions is, in effect, verified. Each person clamoring f

government services is necessarily clamoring to live at the expense of others.

The Purely Free Market: The Imaginary Construction of a Non-Coercive Society

The preceding section provided analytical evidence for the conclusion that every act of

government is redistributive because every government action involves the confiscation and

allocation of wealth in ways that consumers in the purely free market would not have approvedthrough their market-interactions. This definition, however, is entirely dependent upon what is

meant by the“ purely free market”. In footnote 21, it is stated that “the necessary and sufficient

condition of a purely free market society is absoluterespect for each individual’ s body and



constructing the image of a state in which there is no action…The method ofimaginary construction is indispensible for praxeology; it is the only method of praxeological and economic inquiry.33

Mises constructed the imaginary construction of the evenly rotating economy in order to theoriz

about human action.34 The evenly rotating economy assumes the absence of change and time,

that is, it assumes the complete absence of uncertainty given a final state of rest. The evenly

rotating economy also assumes indirect exchange and the use of money. However, as Mises

states, following the ultimate logical conclusions of the assumptions built into the evenly rotatin

economy, there can be no action, entrepreneurship, or money, and thus no market to be inhabite

by the “soulless unthinking automatons” of the evenly rota ting economy.35

As previously stated, Mises comes to an understanding of the function/category of action

“…by constructing the image of a state in which there is no action.” 36 And, Mises states, “In

order to grasp the function of entrepreneurship and the meaning of profit and loss, we construct

system from which they are absent.” 37 Thus, in accordance with Mises, the correct imaginary

construction that will lead us to an understanding of the economic significance of coercion will

be a construction that assumes the absolute absence of coercion — what is called in this analysis

the purely free market. The fact that such an imaginary conception is unrealizable and perhaps

inherently contradictory does not affect the question of whether or not it is a proper tool for

33 Mises, 237-38. For relation of the employment of imaginary constructions, also known as thoughtexperiments or models, to thecerteris paribus assumption implicit in all economic theorizing and to the laboratory-experiments of the natural sciences, see Murray N. Rothbard, “The Present State of Austrian Economics,” In

Economic Controversies , 161-223 (Auburn: The Ludwig von Mises Institute, 2011), 181-182.

34 Mises, 247-251.

35 Ibid. 249-50.

36 Ibid. 238.

37 Ibid. 249.



economic analysis. Thus, I posit that a broader base for economic theory can be found by

replacing another one ofMises’ s imaginary constructions, “the pure or unhampered market

economy,” with the absolutely non-coercive concept of the purely free market. The purely free

marketused in this paper’s analysis of state intervention is identical in every way to Mises’ s

“pure or unhampered market economy” except that there is an absolute absence of coercion. 38

The way to analyze the economic significance of the existence of the coercive State is to start

from a construction which is free from all coercive entities, including the State. From a state of

non-coercion in the purely free market imaginary construction, one can individually analyze the

effect of introducing different types of coercion into the market. In similarity to ProfessorRothbard in Power and Market , the starting piece of information is that a purely free market is

totally incompatible with the existence of the State, or any coercion whatsoever.39

From the comparison of a peaceful and Stateless market-based society with a society tha

has introduced certain forms of coercive interventions individually, the preceding section of this

study has concluded that the existence of the State necessarily implies the redistribution of

38 For discussion of the imaginary construction of the “pure or unhampered market economy,” see Mises,238-240. Note that Mises’ s pure market economy contains the existence of coercion: “It [the imaginary constructionof the pure market economy] assumes that the government, the social apparatus of compulsion and coercion, isintent upon preserving the operation of the market system, abstains from hindering its functioning, and protects itagainst encroachments on the part of other people.” Mises, 239.

39 “Thus, a truly free market is totally incompatible with the existence of a State, an institution that presumes to ‘defend’ person and property by itself subsisting on the unilateral coercion against private propertyknown as taxation.” Rothb ard, 1056.

However, myanalysis is on slightly firmer ground because it does not presuppose, as Rothbard’s analysisdid, that an orderly Stateless market-based society actually could exist; rather my theory asserts that a peaceful andStateless market-based society is the correct imaginary construction to use in analyzing the economic effects of theexistence of the State and the nonexistence of peace. The question of whether or not a Stateless market-based societcould exist is independent of the question of whether or not the imaginary construction of a peaceful and Statelessmarket-based society is the correct basis for the theory of the economic effects of the existence of the State, State policies, and the nonexistence of peace. However, this fine point of the basis of the theory of intervention does notaffect the veracity of Rothbard’s theory of intervention.



wealth, given that all States, by definition, are coercive.As Bastiat states, “Government is that

great fiction, through which everybody endeavors to live at the expense of everybody else.” 40

This is because, with every government policy, one group of society must lose for another grou

to gain. Not all people in society can live at the net expense of others, only the class of tax

consumers can live at the expense of a corresponding group of taxpayers. When state action is

involved, there must be winners, but there must also be losers. In order to validate this

conclusion, we must respond to a common argument that there are certain State actions that do,

in f act, result in everybody’s gain and the loss of no one.

Collective Goods and the Free Rider Problem

In the imaginary construction of the purely free market, there is no institution of

compulsion or coercion; therefore, most economists would have it, people are worse off, to a

certain degree, because the public goods problem, also known as the free rider problem, is able

to permeate the society unchecked. One way for the free rider problem to emerge itself is in the

case of supplying collective, or public, goods or services that are said to be nonexcludible andnonrivalrous, that is, goods or services that benefit everyone within a community once provided

and whose consumption by one member of the community does not diminish the amount able t

be consumed by others. Another way to formulate the definition of collective goods is as goods

that “are indivisible and therefore cannot be allocated by having individual consumers pay for

their own portions of the product.” 41 Assuming rational and self-interested individuals, each

individual in the community will try to consume collective goods at least cost to himself. Thus,

40 Ibid. 99.

41 Murray N. Rothbard, “The Myth of Neutral Taxation,” In Economic Controversies , 449-501 (Auburn:The Ludwig von Mises Institute, 2011), 464.



each member of the community will fail to contribute towards provision of the public good

because each maximizes utility by consuming the collective good at no cost to self — each

member maximizes his utility by free-riding on the contributions of others.42 However, since no

individuals will contribute to the provision of the collective good, each will be worse off becaus

the good will not be provided. Thus,“the public goods problem is epitomized by conflicting

tensions. If all members cooperate, they are all better off; but, if all others cooperate, each

individual member has an incentiveto increase his utility further by free riding.” 43

Collective goods, in a non-coercive atmosphere, will not be able to be supplied, or at bes

will be supplied at sub-optimal levels, according to the theory of collective goods. Thus, each

individual in the community would be better off if the social apparatus of coercion, the State,

could aim in providing or at least enforcing contribution towards the supply of collective goods

To counter this economic assertion, three questions must be asked: (1) How is the economist to

rationally judge,a priori, the optimal level of the supply of collective goods if he lacks

knowledge of each and every individual’s preferences (which is necessary to construct a demand

curve)? (2)What is the basis for assuming that these collective goods are goods for all

individuals? And (3) Is the basis for calling these goods collective rationally sound?

42 This conclusion is derived from the assumption of both rationality and self-interest. However, not allindividuals in the real world are rational and self-interested. Thus, there is extensive literature in experimentaleconomics of public goods games where total contributions by members exceeds zero contribution. For oneexplanation of this behavior, see Robyn M. Dawes and Richard H. Thaler, “Anomalies: Cooperation,” Journal of

Economic Perspectives , 1988: 187-197.

43 Holden Diethorn, James Orange, and Anthony Weisenberger, “The Effect of a Provision Point andPartial Refund Policy on a VCM” (undergraduate’s thesis, Saint Vincent College, 2012), 1.



I. Optimal Supply

If one is to speak of the sub-optimal provision of a good, one must then know the optima

supply of the good. But this cannot be knowna priori if one does not know the tastes and

preferences of all individuals in society. Even if one somehow had access to all historical data

regarding each and everyindividual’s preferences, he still could not judge the optimal supply of

a good or service because individual tastes and preferences are constantly in flux. One cannot

precisely measure the marginal benefits and marginal costs of a good or service without such

information since benefits and cost are primarily psychical phenomena.44 In addition, one can

only deduce the preferences of individuals by their demonstrated preferences, or the ways they

act, in a free market society.

If we start from a purely free market society lacking any coercion, there are exchanges o

goods and services. The economy itself is not at a final state of rest, which is the study of the

evenly rotating economy; rather, the purely free market is the theoretical equivalent of an

actually functioning economy in the absence of any coercion. Now, let’s relax the assumption of

lack of coercion and assume that a State is introduced that provides national security, a justice

system, and laws regulating the use of violent force. Whatever can be said of the morality of

such a system, which is of no interest to the economist qua economist, the system can be said to

be conceivably possible. Given that these State functions all aim at the protection of life, liberty

and property, the system could exist in practical reality as a classical liberal society; this is

Mises’ s imaginary construction of the “pure or unhampered market economy”.

44 Mises, Human Action , 97-98, 205-06.



Now, let us imagine that a group of contractors are pursuing a plan to build a dam that

would increase the property value of all land protected by the dam. In order to build the dam, th

contractors are looking to pull resources from precisely those individuals who would see a rise

their property values due to the protection that a dam would afford. Let us, for the sake of

argumentation, admit that the dam is a collective good and that the money cost per each

individual in the area is lower than the expected increase in the moneyvalue of each individual’ s

property if the dam is constructed. Let us further allow that expectation to be reality, that the

construction of the dam will, with absolute certainty, raise the market of value of each

individual’s property more than it will cost each individual to pay for the dam. Given that thedam is a collective good, the contractors will fail to obtain the necessary revenues to build the

optimal-quality dam due to the free rider problem. Thus, it is commonly asserted, individuals

will inevitably benefit if the government steps in and coerces all individuals in the region to pay

for the optimal dam, because given that the money benefit of the dam exceeds the money cost o

the dam, individuals actually value the dam and simply fail to contribute due to the incentive to

free ride.

In “The Myth of Neutral Taxation,” Murray Rothbard offers valid criticism to this theory

by paying attention to that which is unseen — the opportunity costs of the coercive provision of

collective goods:

Even if free riders benefit from the collective service X, in short, taxing them to

pay for producing more will deprive them of unspecified amounts of privategoods Y, Z, and so on. Weknow from their actions that these private consumerswish to continue to purchase private goods Y, Z, and so on, in various amounts.But where is their analogous demonstrated preference for the various collectivegoods? Weknow that a tax will deprive the free riders of various amounts of theircherished private goods, but we haveno idea how much benefit they will acquirefrom the increased provision of the collective good; and so we have no warrant



II. Collective goods and the assumption of an associated and universal positive utility

An implicit assumption of the public good theorist is that the collective good carries with

it a universal positive utility. In response, it must first be noted that there is no such thing as

intrinsic value; value is always subjective, even when based upon the objective characteristics o

a good or service. Subjects valuate, objects do not contain value. Secondly, as applied to the cas

of the dam, may there not exist at least one environmentalist in the community who negatively

values the construction of the dam because the construction will threaten the pristine atmospher

of the flowing river along with the natural organisms living in the waters and along the river

banks? How can the economist label him simply as a free rider, when in actuality he is morally

opposed to dam-production? Coercing such an individual and the community around him will

decrease, rather than increase his utility if the result is the provision of the dam. We now see tha

the coercive supply of collective goods constitutes redistribution by decreasing the utility of

those morally opposed to or uninterested in the purchase of the collective goods or services and

increasing the utility of those who desire more and higher-quality collective goods.

Given this analysis, we can also see how the coercive provision of national defense,

police forces, and a justice system redistribute wealth insofar as at least one principled pacifist

anarchist is subject to such taxationor “service” . Even those services most basic to the existence

of governmental institutions are seen to be redistributive when compared to the purely free

market.



III. Do collective goods exist?

In the previous section, we have seen how most collective goods cannot be said to carry

universally positive utility for all individuals. But are any goods truly collective, that is, are any

goods actually indivisible?

One possible case of a collective good is a lighthouse. Assuming that the light does not

reach anyone but those arriving at the ports, it appears safe even to assume that lighthouses carr

universally positive utility for all those in the community that use them. However, this does not

imply that the lighthouse must be provided coercively. It is possible to exclude ships from using

the lighthouse due to present radar technology which would only turn the lighthouse on if a

registered ship were in the vicinity. However, prior to this technology, the private provision and

servicing of lighthouses was not only still possible, but was a historical reality. Nobel laureate

economist Robert Coase concludes his definitive study, “The Lighthouse in Economics,” by

stating that private operation has existed and can exist in the lighthouse industry:

The early history shows that, contrary to the belief of many economists, alighthouse service can be provided by private enterprise…The lighthouses were built, operated, financed and owned by private individuals, who could sell thelighthouse or dispose of it by bequest. The role of the government was limited tothe establishment and enforcement of property rights in lighthouses. The chargeswere collected at the ports by agents for the lighthouses. The problem ofenforcement was no different for them than for other suppliers of goods andservices to the shipowner.46

Other possible collective goods include police protection, judicial services, and national

defense. However, economist Kenneth D. Goldin has shownthat “…the pure theory of public

goods is an elegant theory without significant application….T here are no goods or services

46 R.H. Coase, “The Lighthouse in Economics,” Journal of Law and Economic 17 (October 1974): 375.



which are inherently public goods or externalities; … there is always a choice between equal and

selective access; and… there is generally an additional cost to serve additional persons.” 47 He

has shown that police protection, judicial services, and national defense can all be provided in

varying increments that have incremental costs associated. Thus, collective goods do not exist

because the costs and benefits associated are divisible, albeit in varying degrees.

In discussing police protection as a divisible service, Dr. Goldin focuses on the effect of

population growth on the quantity and quality of service. He first notes that as communities gro

in population, more people desire crime defense. If the community wishes for each individual to

maintain the same consumption of protective services as before, then more policemen must behired, which is an increased cost. If more policemen are not hired, then service to all members o

the community must be diminished. This is the only way to protect an increased population wit

a fixed amount of police services. This imposes costs on residents in the form decreased servic

and if members of the community do not wish to suffer an increased risk of crime, they must

purchase other forms of crime defense such as “locks, fences, guard dogs, guards, and also alarm

companies which respond if the burglar alarm is tripped,” as well as private police service. 48

Thus, we can see crime defense services are rivalrous and excludable.

In analyzing court service, Professor Goldin considers the effect of an increasing amoun

of court cases on those seeking judicial services: “To service more persons generally requires

more judges and courtrooms. If more facilities are not acquired, additional users will impose

costs on others, in the form of longer days for trial and/or less judicial time spent on each case.”49

47 Kenneth D. Goldin, “Equal Access vs. Selective Access: A Critique of Public Goods Theory,” PublicChoice 29 (Spring, 1977): 60.

48Goldin, 60.

49 Ibid. 65.



protection against an oncoming nuclear missile. Government protection from a nuclear missile

can then be seen as redistributive insofar as it is financed by the tax revenue of at least one

person who sympathizes with the enemy.

The Purely Free Market, Political Philosophy, and Practicality

As used in this study, the purely free market is an imaginary construction of an

impossible society which is absolutely non-coercive. The role of the idea of the purely free

market is to aid in elucidating the effects of the introduction of different types of coercion into a

peaceful market atmosphere. It is keen to remember that the analysis of government interventio

is actually the analysis of all coercive intervention, whether performed by government officialsor a private individual. The role of the purely free market economy is not to display a political

ideal; there has been no claim that the purely free market economy would be the height of

justice, morality, virtue, or human blossoming. In fact, there is nothing in this analysis that

precludes one from stating that it is the absolute antithesis of the perfectly just society. The mor

character of a society mimicking or approximating the purely free market cannot be deduced

from economic analysis. The moral character of the purely free market is irrelevant to its use as

tool to understand the economic effects of government intervention. It is not meant as a tool to

analyze the moral effects of government intervention. However, one would likely need to know

the economic effects of government intervention before one could pronounce a judgment as to

the morality of government actions. Insofar as that is the case, the imaginary construction of the

purely free market is indispensible for any political theory that seeks to proclaim a value judgment regarding government intervention. One cannot adequately address political



philosophy while remaining in a general state of economic ignorance, which implies an

ignorance of the necessary effects of all human action.52

One important finding for political philosophy is found in the conclusion that every

government policy, and thus the very existence of the State, implies redistribution. Therefore,

anyone other than a free market anarchist must refrain from dismissing a policy simply on the

grounds that it is redistributive. To dismiss a policy on the grounds that it is redistributive is to

dismiss government as a whole. Thus, all supporters of government existence are supporters of

the redistribution of wealth, what they disagree with are how much and for what reasons

redistribution is legitimate. These value judgments remain arbitrary and mere opinion unless justified by a coherent political philosophy. It is the role of political philosophy to come to

rational value judgments regarding the justice of the free market and of different types of

government intervention, whereas it is the role of political economy to discover the causal

relationships between different market interactions and different government interventions.53

On a related note, there are some, including Murray Rothbard, thatdo defend a version of

society similar to the purely free market society as an attainable and most just society. It is not

within the scope of this work to give a full analysis and judgment of this philosophy in terms of

justice, but it is helpful to put it in the context of this present work and to remark on its

practicality. Obviously, the purely free market society is impossible since the existence of viole

individuals at all times and all places has beenthe rule of history. Rothbard’s ideal, rather than

52Economics is the study of human action in the market. Economics is a branch of praxeology, which is theuniversally valid science of all human action, market and non-market.

53 Note that political philosophy is similar to political economy in having found useful the employment ofimaginary constructions to deduce political principles, such asPlato’s “Republic”, Hobbes’s “state of nature,” andRawls’s “original position.” See Plato, The Republic of Plato, Second Edition translated by Allan Bloom, (US: BasicBooks, 1991); Thomas Hobbes, Leviathan , (New York: Cambridge University Press, 1996); and John Rawls, ATheory of Justice, Revised Edition , (US: Harvard University Press, 1971).



being the purely free market, is that imaginary construction that may exist between the purely

free market and Mises’s pure or unhampered market economy. His ideal allows for the

possibility of coercion in society, but posits that market-entities that are not coercively-funded

could carry out those functions commonly ascribed to the State.54 The necessary and sufficient

condition of a Rothbardiansociety is a degree of respect for each individual’s body and private

property that is above a certain threshold. His society would have to be able to quell those

powerful individuals who desire to conquer or illegally expropriate value from the weaker

citizenry. Insofar as a requisite amount of respect for person and property is not held within

society, Rothbard’s syste m is unworkable and a State would likely emerge out of it.55

As long asindividuals in society do not view “legal plunder” as illegitimate, Rothbard’s system is not likely

to ever succeed for any extended period, even if it were morally desirable. The adoption of his

ideal, no matter if he made valid moral claims, would result in disastrous effects if the citizenry

is not prepared for the responsibilities of living in “anarchocapitalist” society. As an ideal for a

practical, and not just theoretical, society, it is in even shakier ground than a limited

constitutional government founded on the principles of life, liberty, and private property. This is

because a citizenry that lacks respect for life, liberty, and property is not fit for the requirements

of a free society with limited government, or no government at all.

Conclusion

Bastiat’s definition of government as “ that great fiction, through which everybody

endeavors to live at the expense of everybody else ” is essentially correct. It both capture s the54See Murray N. Rothbard, For a New Liberty : The Libertarian Manifesto, Second Edition , (Auburn: The

Ludwig von Mises Institute, 2006), 267-299.

55Whether it is possible to ever engender such a high level of respect for person and property, and if possible, how it would be done, is the crucial argument regarding the practicalityof Rothbard’s ideal. Many whomay be sympathetic to his moral arguments may object to the system on practical grounds and regard it as quasi-utopian.



public’s unrealistic appraisal of the nature of government, and , through its implicit criticism of

the common view, sheds light on the actualredistributive nature of government. Bastiat’s insight

into the nature of government, as well as his statement that the good economist needs“…to

avoid judging of things bywhat is seen only, but to judge of them bythat which is not seen ,”

leads to an analysis of government intervention built upon examining the opportunity costs and

redistributive nature of all government interventions. A comprehensive analysis of each type of

government intervention, along with specific examples, shows the efficacy of Bastiat’s definition

to all functions of government, legitimate or illegitimate. It is demonstrated that every

government action results in a class of individuals that benefit only at the expense of anotherclass of individuals who suffer a loss. The underpinnings of the theory of the analysis of

intervention developed in this work were then explicated and defended with reference to the

necessary method of economic analysis — the use of imaginary constructions, also popularly

referred to as economic models. Next, the most common counterargument to the present

analysis, the argument that the coercive power of the State can be used to benefit all individuals

at the expense of no other individual in the case of the provision of public goods, was found to b

dubious and the entire classification of some goods as collective, or public goods, was brought

under scrutiny. Lastly, the economic model of analysis constructed in this work was evaluated i

terms of its scope of relevance for political philosophy. An example of a philosophic view of a

stable society closely related to the purely free market was subsequently evaluated in order to

show to what extent the purely free market is or is not practically attainable.

I end this paper with my own definition of government: Government is, simply,

redistribution of wealth.



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