Frederic Bastiat Value Theory

Frederic Bastiat Economic Harmony; Value

Bastiat devotes no chap­ter to Production for he is not concerned with costs or material limitations. To him, economy lies in exchange, and Economics is the study of exchanges. Wants, efforts, satisfactions, — this is the round. But men commonly obtain satisfaction by giving something in exchange for what is desired. This involves the question of value, and, as with Carey, value is Bastiat's starting point. He founded his theory upon his definition of this term.

Bastiat criticizes various theories of value which had pre­ceded him: utility, scarcity, labor, difficulty of acquirement, estimation, or judgment, — all these he regards as one-sided, though not totally wrong, bases for determining value.

Both the utility theory of Say and the labor theory of Ricardo err in placing value in the material of things. There are two kinds of utility, "gratuitous" and "onerous." The former con­sists of the materials and forces which are the gift of nature, and nothing can be exacted in exchange for it. Onerous utility lies in a service of man to man, and demands a service in return. Now to place value in matter would lead to the conclusion that the gratuitous utilities of nature may confer value. This would mean that landowners would have property in the gratuities of nature, something which Bastiat in his desire to defend the present order against the Socialists will not admit. It would be "as little justifiable as comprehensible." This same error, too, would deny productivity to services which do not result in material things. Wants and satisfactions, he thinks, are not sufficiently commensurable to serve as determinants of value, but he grants that utility is the basis of value if only we do not make it an intrinsic property of things.

Riardo's necessity for excepting goods whose supply is absolutely limited, Bastiat argues, shows that a general law based on labor cost is impossible. Moreover, he asks, how are fluctua­tions in the value of things to be accounted for if their value is determined by the labor expended upon them?

Bastiat, however, would not destroy the labor and utility theories, but would correct their one-sidedness by uniting them. He comes very near to the labor-cost theory when he holds that value lies in "effort"; but he would make effort a broader term than labor, though it is not very clear just what it includes. In exchanging services or goods, only effort or onerous utility is considered, as natural forces are gratuitous. The difficulty arising from fluctuation in the value of stored-up labor, he meets by substituting for effort expended, the effort saved to the re­cipient or purchaser, an idea apparently suggested by Adam Smith's shift from the labor-cost to the labor-exchange point of view. But to the purchaser, this means a service. Hence Bastiat's formula: "Value is the relation of two services ex­changed." The effort saved, or service, is the product of one man; the want and its satisfaction are felt by another; the service, then, commands a compensation in the shape of some counter service.