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Arnaud Pellissier Tanon
The Labour Theory of Value and Social Justice
The Teachings of Social Catholic Criticisms of Bastiat’s Doctrine
Journal des Economistes et des Etudes Humaines Vol. XI n°2/3, June-September 2001,
special issue dedicated to the celebration of Frédéric Bastiat's two hundredth birthday,
Abstract: Social Catholic criticisms of Frédéric Bastiat’s thinking, notably Charles Périn’s, clarify the link between the labour theory of value and the demands of social justice: claiming that Bastiat’s theory of value rests on a sophism, Périn rejects his view that competition is the solution to the social question. Contrary to Bastiat, indeed, he accepts the labour theory of value and apparently makes it a standard of justice: in his eyes, rents sanction an injustice. Social Catholics, particularly René de La Tour du Pin, follow in his tracks, insisting that a specific course must be taken so as to set right the injustice of rents ### the course of ‘social justice.’
I am much indebted for this contribution to M. R. Audouin, M. F. Guillaumat et M. G. Lane who helped me understand Bastiat’s thinking, and to M. E. Poulat, an indefatigable reminder of the demands of research and the conditions of exact understanding. M. B. Cherlonneix, Prof. B. Lemennicier and Prof. P. Salin enabled me to submit this contribution, and Miss S. Potulny provided friendly criticism.
The polish is the fruit of the participants in the colloquium organised by the Centre A. et L. Walras of the MRASH on “ La tradition économique française, 1848-1939 ” (Lyons, October 2-3, 1997), where it was read ### more particularly of M. Marc Pénin, its reporter there ### and finally of Mme J. Balestier’s friendly vigilance; the English translation is by M. N. Col. While I accept responsibility for all imperfections, let me, nonetheless, express my gratitude to all.
A French abridged version has been published in the Acta : Arnaud Pellissier Tanon, "Valeur-travail et Justice sociale, L'Enseignement des critiques portées par les catholiques sociaux à la doctrine de Bastiat", Les traditions économiques françaises, 1848-1939, sous la direction de P. Dockès, L. Frobert, G. Klotz, J.-P. Potier, A. Tiran, Paris, CNRS Editions, 2000, pp. 679-690.
This paper has been awarded the Nowak Award of the Acton Institute for the Study of Religion and Liberty (2001), for which I am most gratefull to the judges.
The historians of ideas who study the passage from the XIXth to the XXth century undoubtedly wonder, among other questions, about the commitment of many Catholics, until the Second World War, to a revival of the guild system. No recent commitment this, incidentally: when setting out the principle of subsidiarity in his encyclical, Quadragesimo Anno (1931), Pius XI was simply endorsing a doctrine that social Catholics had been upholding for about one century.1 The commitment was based on a few well-known political and moral motives, namely, the critique of Jacobin individualism and the rejection of the moral relativism inherited from the Enlightenment.2 Apparently economics was not totally left out: pointing out that the existence of rents shows that an exchange can sanction an injustice, social Catholics argue that a specific course ### in their own words, social justice ### must be taken in order to set this right, and this course, in their concern with decentralisation, they entrust to the guild. Understanding this point in economics is the object of the present paper, based on the way the criticisms levelled by social Catholics ### particularly Charles Périn ### at Frédéric Bastiat’s thinking highlight the ins and outs of the issue: adopting, contrary to Bastiat, the labour theory of value, Périn is led to consider that rents sanction an injustice; social Catholics after him will raise the issue of social justice.
Périn’s criticisms of Bastiat bring to light the logical link between the labour theory of value and the demands of social justice: thus, after presenting Bastiat’s anwer to the social question (one that rests in competition between producers as it results in general enrichment and the equalisation of riches), Périn’s criticisms will be expounded (Bastiat mistakenly argues that the property of natural utilities is always justified by the amount of labour produced to make them usable, while this is not always the case, as proved by the existence of rents); the theoretical lessons of the debate will then be drawn (considering that the phrase, ‘labour spared,’ sanctions a sophism, and assessing value on the sole basis of labour performed, Périn adopts, unlike Bastiat, the labour theory of value); finally the initial question will be answered in the light of its doctrinal importance (those social Catholics who, after Périn, adopted the labour theory of value as a standard of justice were led to think that the injustice of rents, resulting from this theory, must be made up for by social justice).
1) Bastiat’s answer to the social question
One need not present Frédéric Bastiat (1801-1850).3 A staunch advocate of laissez-faire policies, he repeatedly uses the phrase so as to summarise in what spirit he spoke out in favour of free trade and against monopolies. A Republican ‘député’ in 1848, he lambasted in his “ Sophisms ” and “ Pamphlets ” the various brands of socialism of the day: in no way can he be branded a ‘collectivist.’ Nor will his keen interest in pension funds and mutual aid associations allow of any ground for claiming that he ignored the ‘social question.’4 Of all ‘economists’ he was the one who least deserved the criticisms of social Catholics. He gave his thinking a synthetic form in Les harmonies économiques (1850) but his sudden death left the second volume uncompleted.5
He starts with the remark that man is imperfect, yet perfectible. The source of such imperfection and perfectibility is in his free will: imperfection derives from ignorance which overshadows intelligence and weakness which paralyses the will, while perfectibility is lodged in such learning and determination as everybody comes to acquire thanks to the experience of life. The moral and material progress of societies thus does not originate in the suppression of the ‘spring’ of action - put in other words, personal interest6 ###, but in one’s improved use of free will. The precondition, for such improved use to exist, is that legislation should not hamper the spring of action but strengthen the effects of experience, the latter being the gift of Providence to mankind: harmony is the gradual outcome of such legislation.7 This is Bastiat’s vantage point so as to pass judgement on human legislation. Criticising it when it dilutes the effects of experience, as it disrupts the action of the laws of divine Providence, he speaks out in favour of responsibility and those institutions which promote it, among them property, and calls ‘freedom’ the situation of men living under such institutions. In the language of business which has held sway since then, such a situation is called competition.8
Freedom, more precisely competition, provides ### so Bastiat argues ### an answer to the social question: he seeks to demonstrate, thanks to his value theory,9 that ‘the equalisation of individuals against a background of general improvement’10 ### in other words, the general enrichment of the population and the equalisation of properties ### will result from competition between producers. To this effect he follows three stages.
Firstly, as nature freely grants its utilities to the community of mankind but not necessarily in such a way as immediately to meet their needs, men have to work so as appropriate them.11 Labour thus transforms the free, yet useless objects of nature into useful, yet costly objects. As a result, ‘wealth [the sum of utilities] results from the combination of two actions ### that of nature and that of man. The first is free and common, universal in its destination, and never loses this character. The other alone is endowed with value, and consequently appropriated.’12 These actions are at the origin of what Bastiat calls free utility and costly utility.
It follows that ‘the principle of value (…) lies in a human service, [that value] results from the assessment of two compared services’13 (in today’s words, value is the relative price of the exchanged products). ‘The general character of an exchange [being] to reduce the proportion of effort in satisfaction (…), value must be related to men’s efforts to satisfy their needs’14; by exchanging these efforts, they do one another services.15 More precisely, value ‘does not have its principle in the effort made by the one who serves as much as in the effort which is spared to the one who is served,’16 or, in closer terms to those of Adam Smith, ‘value is at least as much assessed by the labour which the assignee is spared as by the labour performed by the assignor.’17
The end of the demonstration deals with the effect of competition on the assessment of value. Bastiat notes, from a static point of view, that ‘as a result of competition, Values tend to adjust to efforts.’18 Competition between sellers thus leads to the alignment of value on the labour they have performed. More, from a dynamic point of view, competition leads men permanently to find a thousand ways of ever reducing that ‘labour performed.’19 It follows that competition between sellers reduces the value of products, hence of properties. In other words, such competition reduces, through exchange, the labour which must be performed with a view to the appropriation of the utility of the objects of nature: it becomes less and less costly; the value of these products comes close to being free. After being made useful by men’s labour, they become, thanks to competition, less and less costly, freer and freer. Bastiat drives in his conclusion: ‘the mission of Property, or rather, the spirit of property is to create more and more community.’20
2) Périn’s critique of Bastiat’s answer to the social question
After perusing the whole of Bastiat’s thinking, Charles Périn, a Professor of Public Law and Political Economy at the Catholic University, Louvain, criticises it in a whole chapter from his handbook, Les doctrines économiques depuis un siècle (published in 1880).21 This critique deserves attention since, barring some misinterpretations of Bastiat’s philosophical bases,22 it strikes home when it comes to the theoretical analysis. To Périn, Bastiat’s distinction between labour performed and labour spared is a nicety leading to a sophism: denying that ‘part of the owner’s revenue usually comes from a utility created by nature, not by man’s labour.’23
This theoretical mistake allegedly dashes the whole of Bastiat’s answer to the social question. As a result, far from adopting Bastiat’s ‘laissez-faire’ policies, Périn expounds a doctrine of ‘abnegation’ as early as 1849 (Les économistes, les socialistes et le christianisme): ‘the remedy to the evils of competition cannot be found in that impossible return to the social organisation of the past (…). It can only be found in the restoration of the principle of sacrifice, the source and condition of all freedom.’24 Now, as this principle is repugnant to human nature, there is no other way but to entrust its enforcement to some kind of power; the institutionalisation of the latter, as it is the true source of morals, will guarantee freedom.25 Périn’s doctrine of the guild was to influence social Catholics as a whole.26
Respecting Périn’s criticism of Bastiat’s reasoning, one need not summarise his thinking as he himself has condensed it. He first notices that Bastiat
tries to establish that the owner does not demand payment for nature’s free gifts of those to whom he sells the use of his property, but only because he does them a service, by lending them an agent of production which they could only replace by a superior expense of labour to the price paid for the use of that property. According to Bastiat, even in cases of natural monopoly, one never exchanges the free gifts of nature but only services. The man who finds a diamond lying about and sells it for one thousand francs, in spite of his only being at the trouble to pick it up, does not demand payment for the free utility which nature has lodged in that diamond; he demands payment for the service he does the buyer of the diamond, by sparing him the trouble to launch on a search which might keep him busy for years.27
Having thus summarised Bastiat’s thesis, Périn criticises it as follows:
Indeed one can always argue that the sole owner of a free utility, such as the diamond or the productive force of the land, does a service when selling or lending it; nevertheless, such a utility costs him no effort or labour at all; now, it is through effort that, in the natural order, in Bastiat’s own words, man is to reach satisfaction. Then it is not (…) through the order of nature, but merely through a stipulation of civil law that some men are the exclusive owners of utilities which Providence created for the general advantage. The alleged services they do, when giving away such utilities to others, find their justification only in the arbitrary stipulations of human law; these stipulations are banned by natural law or the law of equality. Everybody longs for the right to return the services on which one claims to found the right of the owner, as this right constitutes an advantage free of any form of sacrifice whatever.
At the root of this justification of property by the theory of services there lies the strangest of all sophisms. According to this theory, property is the means through which satisfaction can be achieved; effort must be followed by satisfaction; the effort which one makes can be turned to someone else’s satisfaction, when these two individuals barter their respective efforts; this is what constitutes an exchange of services. Now, what happens when one man sells a diamond which he found on his way, or when a landowner receives a rent which increases every year through the natural course of things? One can argue that it merely is an exchange of services the legitimacy and necessity of which is established by natural law. One forgets that such a reasoning attributes two widely different meanings to the word ‘service.’ In turn it is interpreted as the effort made by the one who does the service and the effort spared to the one who benefits by the service, although the one who does it has been at no trouble at all. One finds, between these two meanings of the word ‘service,’ the vast difference between free utility and costly utility. One does not notice that the confusion is an attempt at justifying the appropriation of utilities supplied by nature on the basis of points which can only apply to labour-created utilities (…). It remains, as a result, that part of the owner’s revenue usually derives from a utility created by nature, not by man’s labour.28
3) The theoretical teachings of the debate
Périn thinks that he has exposed the sophism, namely that Bastiat misleads his readers into a belief that the property of the utilities of nature is always justified by the labour involved in making them usable; but this is not always the case, as established, in Périn’s eyes, by the phenomenon of land rents. In other words, there exist, according to Périn, utilities which are both free, as they are usable without any labour at all, and costly, as they must be purchased. But when he attacks artificial rarities, such as monopolies or protectionist measures,29 Bastiat does not deny the existence of natural rarities. He merely denies, unlike Ricardo, that a rent is this part of the product of the land which is paid to the owner so as to be allowed to exploit the original, imperishable productive faculties of the land.30 Nor, more precisely, does Bastiat deny that one pays a rent so as to be allowed to exploit the productive faculties of the land, but he denies that rents are part of the product of the land. He denies it as, to him, the rent paid by the farmer to the landowner is a reward for the service which the latter does the farmer when making the productive faculties of the land available to him. On this point Bastiat is apparently faithful to his own doctrine whereby men’s properties find their origins in their efforts to appropriate the utilities of nature, a doctrine which makes it possible to call them ‘costly’ in that some labour has been necessary to make them available to men (contrary to ‘free’ utilities which can be appropriated at no cost). In today’s words, Bastiat considers that land rents are the landowner’s profit as entrepreneur of land services: ‘the value of the land, or rather of the capital put in the land (…) does not only depend on the amount of labour put into it, but also on society’s power to reward this labour, on Supply as well as Demand.’31
Clarifications about Bastiat’s views on profit and Périn’s theory of value are indispensable to a proper understanding of this analysis.
No explicit definition of profit has been put forward by Bastiat. Yet, apparently, as the object of exchange ### as already noted ### is ‘to reduce the proportion of effort in satisfaction,’ Bastiat’s analysis implicitly includes an understanding of profit as the difference, to the participant in an exchange, between his labour spared and his labour performed (in today’s words, profit in exchanges).32 Such a definition of profit helps understand why, to Bastiat, it stands to reason that the scarcity of land results in the alignment of its rent or price on the labour which the tenant or the buyer is spared, not on the labour performed by the owner or seller so as to make them cultivable (in today’s words, Bastiat points to the existence of quasi rents): whatever his not explicitly tackling the issue, there is no contradiction between his thinking and the theory of the setting of the market price by marginalist theorists of exchanges.33
Like many of his contemporaries, Périn is scandalised by the rents which the landowner benefits by: he does not notice that the farmer too benefits by rents and that, broadly speaking, both the buyer and the seller in any exchange benefit by rents too. Nor does he understand that the return to buyer and seller alike exceeds what either has performed, and that rents do not sanction any theft at all but a gift (to borrow from his own doctrine of justice which will be presented further down). Nor, finally, does he understand that one participates in an exchange if the labour which he spares himself exceeds the amount of labour which he performs. There is no room in his thinking for a prefiguration of profit in exchanges. He charges Bastiat with going the whole length of denying the obvious, namely the existence of land rents, because he misses the outlook on profit implicitly lodged in Bastiat’s thinking.
It remains to understand why he misses it. Clearly, when he says, as already noted, that ‘at the root of this justification of property by the theory of services there lies the strangest of all sophisms,’ Périn confuses the first two stages in Bastiat’s reasoning, namely the doctrine that the utilities of nature are appropriated through men’s labour and the definition of value based on the relationship between exchanged services; he precisely confuses what Bastiat tried to distinguish, that is, the effort to appropriate and, on the other hand, the effort in relation to which value is set. Périn precisely confuses costly utility and value when assessing the one and the other through effort performed; conversely, Bastiat tried to distinguish between them (tried, not more, as his thinking does not seem to be perfectly formulated at this juncture) by assessing the former just as Périn does, while assessing the latter either through labour performed or labour spared, a function of competition occurring between sellers or purchasers. The possible conclusion is that Périn, by considering that the phrase, ‘labour spared,’ sanctions a sophism and by limiting the assessment of value to labour performed only, adopts, contrary to Bastiat, the labour theory of value.34
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