Applying The Seen And The Unseen To Matters Of Accounting For Wealth.
When the bemoaning of cheap consumer goods, trade deficits and of displacements of workers due to newer capital investments in both industrial production and various services in general are coupled with a heavy embracing of the belief that aggregate spending and “production” in the general abstract sense are what determine the health of an economy (i.e., as measured by GDP, regardless of how much so called production is in response to consumer demand or of the hegemonic rule of state planners), and this view is still alive 170 years after Bastiat wrote the Harmonies, is it any wonder that the campaign logo “Make America Great Again” was both sported and sentimentally so alluring to so many President Trump supporters last year?
The tendency of trade protectionists and economic nationalists to view property rights in a quasi-nationalist construct, seeing unemployment of domestic laborers as inherently bad, regardless of the interests of producers, investors, entrepreneurs, is dismissive of the bigger picture effects in international trade. Even if growing international trade deficits mean that more former domestic laborers are laid off, and are now employed or employable only at lower wages, it also means that laborers in other nations who’s said labor is outsourced for goods that we formerly produced, are now competitive enough to produce goods that will inevitably free up our labor to be available for other lines of employment.
Bastiat’s use of the term real wealth was very helpful in this chapter so that the reader doesn’t lose sight of the interest of the consumers, even when certain producers endure losses and have to go under.
“From the point of view of our satisfactions, that is, as far as our real wealth is concerned, we are as much enriched by the value that we have lost through progress in the means of production as by the value that we still possess.
In the transactions of everyday life we no longer take utility into account, in so far as, through the decrease in value, it becomes free of charge. Why? Because what is free of charge is common to all, and what is a common possession has no effect on each person’s individual share of the total real wealth. No exchange is made of what is held by all in common; and since, in business transactions, we need to know only that proportion which is constituted by value, that is all we concern ourselves with.” 
This goes back to the seen and the unseen. We must be very careful in our analysis to separate not just value and utility, as we learned from the chapter five review, but here to know that with production losses, trade deficits or labor being dislocated, not to miss the interests of consumers being served. Bastiat’s insight is very keen and from the beginning of the chapter he lays out the foundation of what we need to always observe.
“…for if we identify wealth (meaning the real, effective level of our material comforts) with value, if in particular, we affirm that wealth and value are in direct proportion to each other, we run the risk of putting our economic thinking on the wrong track. The works of second-rate economists and of the socialists prove this only too well. … and we expose our minds to the greatest of all dangers-that of becoming involved in a petitio principii in which we assume as true what we are trying to prove, of looking at political economy backwards and constantly confusing the goal that we wish to reach with the obstacle that blocks our way.” 
And by exposing our minds to said dangers, we inherently feed the notion of business losses/bankruptcies, outsourced various stages of production, as being inherently bad or undesirable, but missing the forest through the trees in not looking for the changing patterns of consumer demand which result from newer, more innovative methods of production as capital investment/accumulation increases enabling a much more productive labor force and higher standards of living, more leisure and time freed up to pursue other things on your value scale, so to speak. Continue reading “Economic Harmonies: Chapter 6 Review – Accounting For Wealth”