Populist financial analyst John Mauldin seem to have misrepresented Frédéric Bastiat in his latest outlook.
Mr. Mauldin writes of Frédéric Bastiat,
He was a strong proponent of limited government and free trade, but he also advocated that subsidies (read, stimulus?) should be available for those in need, "... for urgent cases, the State should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions."
Really?
Here is the complete quotation from the great Frédéric Bastiat in Justice and fraternity, in Journal des Économistes, 15 June 1848, page 313 (Wikipedia.org) [quoted from Bastiat.org, bold emphasis mine, italics as per Mr. Mauldin’s quote]
When a great number of families, all of whom, whether in isolation or in association, need to work in order to live, to prosper, and to better themselves, pool some of their forces, what can they demand of this common force save the protection of all persons, all products of labor, all property, all rights, all interests? Is this anything else than universal justice? Evidently, the right of each is limited by the absolutely similar right of all the others. The law, then, can do no more than recognize this limit and see that it is respected. If it were to permit a few to infringe this limit, this would be to the detriment of others. The law would be unjust. It would be still more so if, instead of tolerating this encroachment, it ordered it.
Suppose property is involved, for example. The principle is that what each has produced by his labor belongs to him, the more so as this labor has been comparatively more or less skillful, continuous, successful, and, consequently, more or less productive. What if two workers wish to unite their forces, to share the common product according to mutually agreed-upon terms, or to exchange their products between them, or if one should make a loan or a gift to the other? What has this to do with the law? Nothing, it seems to me, if the law has only to require the fulfillment of contracts and to prevent or punish misrepresentation, violence, and fraud.
Does this mean that it forbids acts of self-sacrifice and generosity? Who could have such an idea? But will it go so far as to order them? This is precisely the point that divides economists from socialists. If the socialists mean that under extraordinary circumstances, for urgent cases, the state should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions, we will, of course, agree. This is done now; we desire that it be done better. There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it. It is quite evident that organized charity would, in this case, do much more permanent harm than temporary good.
Bastiat was for subsidies (stimulus)? Go figure.
This is a nice example of doublespeak or the language that deliberately distorts or reverses the meaning of the words or statement—usually employed in politics. Yes just pick out an excerpt from which to stress one’s bias, even if these had been taken out of context.
Oh by the way, Mr. John Mauldin may have also misread the Black Swan Theory
He writes,
A Black Swan is a random event, something that takes us all by surprise. Economic Black Swans are actually quite rare. 9/11 and the aftermath was a true Black Swan.
This barely represents the definition of the theory
According to the book description of Nassim Taleb’s Black Swan: The Impact of Highly Improbable [bold emphasis mine]
A black swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was…
Why do we not acknowledge the phenomenon of black swans until after they occur? Part of the answer, according to Taleb, is that humans are hardwired to learn specifics when they should be focused on generalities. We concentrate on things we already know and time and time again fail to take into consideration what we don’t know. We are, therefore, unable to truly estimate opportunities, too vulnerable to the impulse to simplify, narrate, and categorize, and not open enough to rewarding those who can imagine the “impossible.”
For years, Taleb has studied how we fool ourselves into thinking we know more than we actually do. We restrict our thinking to the irrelevant and inconsequential, while large events continue to surprise us and shape our world.
Black swans appear to be random when they are products of OUR failure to "take into consideration what we don’t know”. In short, the knowledge problem
For instance, 9/11 was considered a black swan for the victims, but not for the terrorists.
Mr. Taleb alludes to the Turkey problem as model for the Black Swan theory: For the turkey—after months of fattening who suddenly have been put into the dinner table for Thanksgiving—would be a (surprise) black swan, but not for the butcher.
This applies to the financial markets as well.
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