Financial Bailouts and the Philosophy of Frédéric Bastiat

Abstract

Frédéric Bastiat (1801-1850) was a French thinker who did most of his writing in the last six years of his life. One of his major contributions to economic thought was his application of opportunity cost to a wide range of economic policies. The present paper uses the Bastiat approach to analyze the economics of bailouts and concludes that bailouts always and everywhere result in negative-sum games and necessarily violate the property rights of some individuals. A bibliography with links to other Bastiat studies is also included.

Keywords: Bastiat, Keynes, multiplier, bailouts, Broken Window Fallacy, utilitarian ethics, property rights, plunder, French liberals, opportunity cost, rent seeking

JEL Classification: B1,B21,B22,B31,B41,B53,D23,D3,D61,D63,D72,E12,E2,E51,G28,H1,H2,H23,H5,H81,K11,L,P14,P16