Assignment on

• Jeremy Bentham
• Jean-Baptiste Say
• Nassau Senior
• Frederic Bastiat

Course Name: Economic Thoughts in Perspective

Subordinates Under
Kawsar Hossain
Lecturer
Department of Economics
Jahangirnagar University

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Group Name: Team Great Depression

Group Members
1. Nusrat Jahan Mahiya (392)
2. Taposhi Dey Prapti (393)
3. Sadia Rahman (404)
4. Asma-Ul-Husna (407)
5. Snigdha Krishna Das (415)
6. Asif Iqbal (421)
7. Al-Amin (440)
8. Joy Bhusan Debnath (447)
9. Ar Rafi Siyam (453)
10. Sakiba Satter Mithila (1949)
11. Md. Anamul Hasan Raihan (2574)

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Contents

• Social Origins of the Premises of Utility Theory

• Jeremy Bentham
✓ Jeremy Bentham on Utility
✓ Bentham as a Social Reformer

• Jean-Baptiste Say
✓ Say on Utility, Production and Income Distribution
✓ Say’s Law of Market

• Nassau Senior
✓ Nassau Senior's Social Orientation
✓ Seniors Theoretical Methodology
✓ Senior's four propositions
✓ Senior on Utility maximization
✓ Senior on Prices
✓ Senior on Glut
✓ Senior's Views on Population and Workers’ Welfare
✓ Senior's view on capital accumulation and abstinence
✓ Senior's view on land
✓ Senior's view on class distribution of income

• Frederic Bastiat
✓ Foundation and Scope of Bastiat's Utilitarion Economics

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 Social Origins of the Premises of Utility Theory

The intellectual foundations of the utility theory are

1. The mental awareness of these special human conditions engendered by the capitalist mode
of production and
2. The universal projection or generalization of these conditions as pervasive, unalterable,
natural characteristics of all human beings in all societies.

We will discuss five particularly important features of capitalism and how they have been
perceived by those within the utility tradition in economic theory.

First, the specialization of labor and the isolation of producers led individuals to see themselves
not as integral parts of an interconnected, interdependent socioeconomic whole, but as isolated,
independent, atomistic units, each concerned with his or her own survival against the impersonal,
immutable forces of the market. To a considerable extent, individuals felt alone, isolated, and
alienated in their humanness; other individuals were not seen as integrally connected, mutual
sharers of a common humanity, but merely as so many facets, aspects, or embodiments of the
impersonal forces of the market. This new point of view can be seen most clearly in the writings
of Thomas Hobbes. In the absence of social restraints, Hobbes believed that this innate egoism
inevitably led to a "natural state" of war, with each person pitted against all others. In this "state
of nature," the life of each person was "solitary, poor, nasty, brutish, and short." The only escape
from brutal combat, Hobbes argued, was the establishment of some source of absolute power-a
central government-to which each person submitted in return for protection from all other persons.

Second, accepting that human nature was competitive and egoistic, how did the thinkers in the
utility tradition conceive the basis, or essential source, of human motivation? Increasingly, they
came to see all human motives as stemming from the desire to achieve pleasure and avoid pain.
This belief is called utilitarianism and is the philosophical basis of the utility theory of value and

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modern neoclassical economics. Utilitarianism received its most distinctive, classical formulation
in the writings of Jeremy Bentham, which will be discussed later.

Third, economic specialization necessarily created a complete dependence, both individual and
social, on the successful functioning of the market. Individual specialized producers could not live
if they could not sell their commodity for money and then buy the assortment of commodities,
each produced by other specialized producers, that was necessary for them to sustain themselves.
Accepting capitalism as natural and eternal, Economists were powerfully impressed with how
much better off all people were when the market functioned well than when it functioned poorly,
or with how much better off all people were with a market than they would be without one. The
market, then, was seen as a universally beneficial social institution.

Fourth, the most important prerequisite for productive specialization was the creation and
accumulation of new and more complex tools, machinery, and factories, that is, the accumulation
of capital. It is obvious that, in any society, the means of production can themselves be produced
and accumulated only if a significant portion of the society's productive capacity is devoted to
producing these tools and machinery rather than to producing food, shelter, clothing, and other
consumption goods.

Fifth, as the capitalist market system developed, the intensity of competition among capitalists
increased. Profit making was no casual, relaxed, idyllic affair. Each capitalist was faced with
competitors trying to undercut prices, outsell, and in general destroy him or her economically.
Making profits depended on achieving some measure of calculated, rational, and predictable
control over raw materials, labor power (i.e. capacity to work), expenses of production and
transportation, and final sales in the market.

These five aspects of human behavior and self-perception under capitalism- atomistic
individualism, egoistic utilitarianism, dependence on markets, the financing of industrialization
out of profits, and calculating rationalism-became the intellectual foundation of the neoclassical
theory of utility and social harmony in the late nineteenth and twentieth centuries.

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 Jeremy Bentham

Jeremy Bentham on Utility

Utilitarianism received its most distinctive, classical formulation in the writings of Jeremy
Bentham (1748 – 1832) whose work, that had the most powerful influence on nineteenth – century
economic theory , “ An Introduction to the Principles of Morals and Legislation .” published in
1780. Although it does not deal directly with economic theory, it contains an elaborate statement
of the utilitarian social philosophy which was to become the philosophical basis of neoclassical
economics during the last several decades of the nineteenth century.

Bentham started his book with statement that

“Nature has placed mankind under the governance of two sovereign masters pain and pleasure.”

And he began with the assertion that all human motivation, in all times and all places, can be
reduced to a single principle: the desire to maximize one’s utility. He stated utility as:

“By utility is meant that property in any object, whereby it tends to produce benefit, advantage,
pleasure, good, or happiness, or to prevent the happening of mischief, pain, evil, or unhappiness
to the party whose interest is considered.’’

So, Bentham believed that all human motivations were merely manifestation of the desire for
pleasure and the avoidance of pain. Because pain was merely negative pleasure, Bentham’s
principle of utility could be restated as

“All human activity springs from the desire to maximize pleasure.’’

By reducing all human motives to a single principle Bentham believed that he had found the key
to the construction of a science of human welfare or happiness that could be stated mathematically
and might someday be worked out with the same numerical exactitude as the science of physics.

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“Pleasures . . . and the avoidance of pains are . . . ends,” he argued , which can be numerically
quantified such that we can “ understand their value .”

He suggested a possible method for quantifying pleasures:

To a number of persons, with reference to each of whom the value of a pleasure or pain is
considered, it will be greater or less, according to seven circumstances:

1. Its intensity.
2. Its duration.
3. Its certainty or uncertainty.
4. Its propinquality or remoteness.
5. Its fecundity.
6. Its purity.
7. Its extent.

He then went into a discussion of the specific ways in which these circumstances might suggest
how one could rationally calculate the values of pleasure and pains.

Bentham not only conceived of human beings as calculating maximizers of pleasure, he also saw
then as being fundamentally individualistic. “In the general tenor of life,” he wrote , “in every
human breast , self – regarding interest is predominant over all other interests put together … self
– preference has place everywhere .” He believed, people were also essentially lazy. Any kind of
exertion or work was viewed as painful, and , therefore , work would never be undertaken without
the promise of greater pleasure or the avoidance of greater pain .

Each of these ideas of Bentham was to become more important in the subsequent development of
the utility theory of value. Bentham believed:

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“All value is founded on utility … where there is no use, there cannot be any value.”

Smith and Ricardo would have agreed that use value was a necessary condition for exchange
value. But, as Ricardo insisted, when one sees value as created by labor , then an increase in the
productivity of labor lowers the value of a commodity while increasing the general wealth . When
Bentham started that “it is by the degree of that value that wealth is measured,” he was speaking
from the utility theory perspective, in which an increase in utility increases a commodity’s value
and hence increases its owner’s wealth.

Thus, Bentham not only formulated the philosophical foundation of the later tradition of
neoclassical economics but also came very close to developing a theory of the relationship between
marginal utility and price. The development of his ideas also foreshadowed an important split in
the orthodox utility approach to economics.

Bentham as a Social Reformer

In Bentham’s earlier writings, he accepted Smith’s argument that a competitive free market would
allocate productive resources to those industries in which they would be the most productive. He
therefore believed that government interference in the free market might very likely diminish the
level of production.

Bentham also accepted, during his early writings, that aggregate supply would always equal
aggregate demand in a free market. In such a market there need never be a depression or any
involuntary unemployment because any savings was automatically converted into more capital
with which to employ more labor.

However, by 1801, Bentham’s opinions about government intervention in the economy had
undergone a change and he started

“The interference of government, as often as … [it results in] the smallest … advantage … is an
event I witness with … satisfaction.”

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This change of opinion was prompted by two principal concerns, each of which was later to
become an important argument against complete laissez-faire. First, Bentham, like Malthus, came
to see that saving might not be matched by new investment. In this event, production would
diminish, un-employment would be created, and the free market would not be functioning in the
best interests of the public. "Suppose an increase in the habit of frugality," he wrote. "Its first effect
will be to diminish the mass of expenditure on consumption." Its ultimate effect would depend on
how the saving was used. Suppose, he continued, that the money, "instead of being put into
circulation, is for an indefinite time put into a chest and kept there." In that case, saving would lead
to decreased prices and production; profits would decline and so would investment. In such a case,
Bentham argued, if the government increased the amount of money in circulation, "then the money
introduced ... becomes a source of increasing wealth."

The second reason for government interference in the market was to lessen the socially harmful
effects of great inequalities of wealth and income. Bentham believed that a person's capacity to get
enjoyment from money declined as he got more money. In modern utility terminology, he believed
in a diminishing marginal utility of money. Therefore, all other things being equal, a government
measure that redistributed money from the rich to the poor would increase the total of society's
aggregate utility:

[Government had to be a benevolent, impartial institution, equally interested in every individual’s

Thus, over Bentham’s lifetime, there was a split or antagonism between his earlier extreme laissez
– faire attitude and his later reformist attitude. This same split was to be reflected later in the
neoclassical tradition, which was constructed on the foundation of Bentham’s utilitarian
philosophy.

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In addition, an inadequacy that was to be pervasive in the neoclassical approach can be seen clearly
in Bentham's reformist phase: If the government carried out reforms that increased the general
welfare by redistributing wealth and income from the rich to the poor, then it was necessary for
the government to have no narrow or special interests of its own. It had to be a benevolent,
impartial institution, equally interested in every individual's welfare. How-ever, the government
was not made up of angels, or "philosopher kings," but of ordinary persons, who, in accordance
with "general human nature," were egoistic and interested in maximizing their own pleasure. If
one asks the question of whether legislators were more likely to receive material benefits by
promoting the interests of the poor or the interests of the rich, the inherent difficulty in Bentham's
belief in beneficial social reform by a fair and impartial government becomes obvious.

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 Jean-Baptiste Say

Say on Utility, Production and Income Distribution

J.B. Say (1767-1832) considered himself to be a disciple of Adam Smith. He claimed to be simply
systematizing Smith’s ideas and correcting certain minor errors that Smith had made. But the
correction of minor errors, however, ultimately resulted in the abandonment of some of Smith’s
most important ideas and the laying down of a foundation for a quite different tradition of
economic theory.

Say asserted that the price or exchange value of any commodity depends entirely on its use value
or utility:

The value that mankind attaches to objects originates in the use it can make of them . . . . [To the]
inherent fitness or capability of certain things to satisfy the various wants of mankind, I shall take
leave to affix the name utility .... The utility of things is the ground-work of their value, and their
value constitutes wealth ....

Although price is the measure of the value of things, and their value the measure of their utility, it
would be absurd to draw the inference, that, by forcibly raising their price, their utility can be
augmented. Exchangeable value, or price, is an index of the recognized utility of a thing.

In rejecting the notion that labor was the source of value and insisting that only utility creates
values, Say not only departed sharply from the ideas of Smith and Ricardo, he also placed the
utility approach in the context of a methodological approach and a social philosophy that slow him
to be along with Nassau Senior, the most important of the pioneers of the neoclassical tradition
that came to dominate economics beginning in the late nineteenth until the present time.

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In the writings of Smith and Ricardo, it is clear that labor incomes are fundamentally different
from the incomes that accrue from ownership of the means of production. In recognizing the source
of this difference, they were led to the conclusion that class conflict characterized capitalism.
However, when they reverted to the exchange or utility approach to economic theory, they were
led to the conclusion that free market capitalism was inherently a system of social harmony.

Say resolved this dilemma by rejecting completely the production perspective or labor theory of
value approach to economic theory. Within his utility framework, he totally cancelled the
theoretical distinction between the incomes of the different social classes.

Instead of seeing the process of production as a series of human exertions applied to transform
natural raw materials into usable goods, Say asserted the existence of different “productive
agencies” that combined together to produce goods. What these productive agencies were
producing was “utility” and each agency was coequally responsible for the production of utility.
These productive agencies included "human industry, with the aid of capital and of natural agents
and properties," and altogether they created "every kind of utility, which is the primary source of
value." In other words, there was no qualitative difference in the creation of utility, between the
exertion of human labor, on one hand, and the ownership of capital, land and property, on the
other.

Say attempted to defend the essential similarity between working and owning by arguing that
commodities were “invested with value by the necessity of giving something to obtain them”.
Objects of wealth were obtained only by human sacrifice. The sacrifice given up by the workers
who produced the commodities was obvious. Say wanted to show that owners of the means of
production received their incomes from similar sacrifices. He asserted that frugality was the source
of capital ownership and frugality involved as much sacrifice as working.

Having argued that working and owning capital involved similar sacrifices and that workers and
capitalists had similar moral justifications for their incomes. Say anticipated the neoclassical
theory of distribution by totally revising the relationship that Smith and Ricardo had seen between

12
income distribution and commodity values. Whereas Smith and Ricardo argued that commodity
prices reflected the rate of wages and the rate of profits and that three rates were determined by
other social and technical considerations. Say argued that wage and profit rates were determined
by the relative contributions to utility creation made by labor and capital. In Say's words:

The value of products is not founded upon that of productive agency [that is, not the rates of profit
and wages], as some authors have erroneously affirmed; ... since the desire of an object, and
consequently its value, originates in its utility, it is the ability to create the utility ... that gives value
to a productive agency; which value is proportionate to the importance of its co-operation in the
business of production.

This theory of income distribution, was fully developed by John Bates Clark, had the ideological
advantage of showing that each person received as income an amount determined solely by the
importance of his or her sacrifices in creating the utility enjoyed by all of society. Not only were
profits and wages paid for very similar reasons, but also there was an important sense of social
justice in the notion that each person received from society an amount determined only by his or
her own (or his or her capital's) contribution to society's wellbeing. Therefore, within this utility
approach to value and distribution theory, all notions of class conflict disappeared.

A central purpose of Say's Treatise was to demonstrate that social harmony and not class conflict
was the natural result of capitalist economy. And he believed that political economy

“proves that the interest of the rich and poor…… are not opposed to each other, and that all
rivalships are mere folly.”

Say's ideas were founded on an unquestioned acceptance of capitalist property relationships. He

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Say's Law of Markets

Another important aspect of Say’s writings was his belief that a free market would always adjust
automatically to an equilibrium in which all resources - including labor - were fully utilized, that
is, to an equilibrium with full employment of both labor and industrial capacity.

Although Smith, Ricardo, and Bentham (in his earliest writings) had argued that a free, competitive
market automatically created full employment, this belief in the automaticity of the market
subsequently came to be known as "Say's law." Economists who rejected this "law" have included
Malthus, Bentham (in his later writings), Karl Marx, and John Maynard Keynes.
In a lengthy and famous exchange of letters with Malthus, S ay defended his belief that there could
never be a general glut or a depression involving involuntary unemployment. He argued that a
market economy is one in which specialized producers exchanged their products. Money had no
inherent importance but was merely a means of facilitating exchange. No one would produce, Say
argued, unless that person wanted to exchange his or her production for someone else's production.

Therefore, a supply creates a demand of the same magnitude. "Produce opens a vent for produce,"
he maintained. If this was true for each producer taken individually, it must be true of the
aggregates of supply and demand; that is, aggregate supply must equal aggregate demand.

Say argued, there could be a temporary glut of some commodities, but this would result from the
fact that market equilibrium had not been attained. Some prices would be too low and others too
high, relative to their respective long-run equilibrium prices or costs of production.

In this case, there would be a glut of those commodities whose prices were too high and
simultaneously a shortage of those commodities whose prices were too low. The gluts and
shortages would exactly cancel out in the aggregate.

Furthermore, those capitalists selling commodities at too low a price would receive a low profit,
while those selling them at too high a price would receive high profits. The search for maximum

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profits would then cause capitalists to leave the low -priced industries and enter the high-priced
industries. This migration of capitalists would have two effects.

First, it would alter the prices, raising the prices that were too low (because less would be
produced and sold, and buyers would bid up the prices in their attempt to secure their share of the
diminished produce) and lowering the prices that were too high (because more would be produced
and sold, and sellers would bid down the prices in their effort to find buyers for the additional
produce).

Second, it would lower the quantity produced of the commodities for which there was a glut,
and it would increase the quantity produced of commodities for which there was a shortage.

Thus, throughout the entire process, aggregate supply would always equal aggregate demand, but
individual shortages and surpluses would be eliminated by price changes and the migration of
capitalists from low-profit industries to high-profit industries.

In Say's words,

If there is an overstock, of many kinds of goods, it is because other goods are not produced in
sufficient quantities.

That [commodity] which sells above its cost of production will induce a part of the producers of
the other commodity to the production of ... [the higher-priced commodity] until the productive
services are equally paid by both.

This, then, will assure that aggregate demand not only equals aggregate supply, but that demand
and supply for each and every commodity will be equal. Thus, the market can never have a glut of
all commodities. Furthermore, temporary shortages and surpluses among different commodities
will be eliminated automatically by the free, competitive market. These conclusions constitute
Say's law and are still accepted by many economists, and policy makers, today.

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 Nassau Senior

Nassau Senior's Social Orientation

Senior (1790-1864) also selected certain ideas of prior economists, modified some and added ideas
of his own, to develop a consistent theoretical justification of the status quo of 19th c. capitalism.
He was a lawyer, an intimate friend of many prominent members of the Whig party, and the party's
general adviser on social and economic questions. In 1825 he was appointed to the first chair of
political economy at Oxford. He was most interested in the condition of workers and the causes
and consequences of poverty. His ideas changed a great deal in 1830, and his work after that time
was his most influential. Before 1830, he was politically conservative, but a reformer with hope
for improving the 'pauper problem'. His 1828, argued against Malthus, that increases in
productivity could be accompanied by improvements in the "moral character" of workers, so that
they could rise above bare subsistence. He supported moral education as the hope for eliminating
poverty.

From 1829 to 1842, there was increasing labor "difficulties". Early industrialization had reduced
the English working class to unprecedented levels of exploitation and suffering, and in the 20's
and 30's, labor began to fight back. Massive efforts to illegally unionize met with harsh repression,
resulting in widespread strikes, riots, sabotage, which terrified Senior and others, especially what
he called "the fires and insurrections which terrified the south of England in the frightful autumn
of 1830." He became convinced that the poor laws and the dole were the principal *causes
of poverty* and a threat to the very existence of English capitalism.

He was no longer concerned with the misery caused by poverty, but with "the threat of an arrogant
laboring class, resorting to strikes, violence and combinations [unions], a threat to the
foundations not merely of wealth but of existence itself." Poor laws gave allowances based on
family size, and Senior thought that this decreased the incentive to work and created the arrogant
attitude of workers that *their families had a right to exist* even if the workers themselves did not
or could not find work. In not checked, Senior was sure that the anger, arrogance and fanaticism

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of the poor would eat up all rent, tithes, profit and capital and result in famine, pestilence and civil
war.

Senior deplored the increasingly popular socialist ideas of Hodgskin, Thompson and Owen,
arguing that equality could only mean equally poor and miserable. "Though it is in the power of
human institutions to make everybody poor they cannot make everybody rich."

In 1832, he was made a member of the Poor Law Inquiry Commission, and he largely authored
the report released in 1834, which was the basis of the new poor law, passed in 1834. It
implemented the following views:
1. workers should accept any job the market offered.
2. the unemployed should be gen barely enough to survive
3. the dole must be substantially lower than the lowest wage offered on the market, and should
be make so miserable and socially stigmatized as to motivate him to take any job, no matter what.

Seniors Theoretical Methodology

Senior's economic analysis was mart completely developed in his "An outline of the science of
Political Economy”, first published in 1886. The first chapter of the "outline" contains a statement
of his methodology.

Senior believed that so much controversy existed in theories of political economy because
economists had concerned themselves with social welfare rather than merely analyzing wealth,
when one considered social welfare, one was. Immediately involved in normative are ethical
statements reflecting the positions of varying contending groups involved in social conflicts, at
was thus inevitable that intellectual conflicts would arise, Ethical statements, Senior declared, were
not subject to either scientific confirmation on disproof.

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Senior asserted, if political economy was to become a science, it was first necessary to eliminate
all of the unscientific, ethical premises contained within it. After there were eliminated, a few
dearly established empirical principles of economic life would remain. Tran, using logic,
economist would be able to explore scientifically all of the theoretical and practical implications
empirically substantiated principles. So, Senior’s position was that economics would be a value-
free, neutral, "pure science".

Senior's four propositions

From everyday experience and contemplation, Senior listed four general propositions that he
believed to be self-evidently true:

1. Everyone wants to increase their wealth with the least amount of effort possible

2. The second proposition is based on Malthusian's population theory. That the world's population
is only limited by moral or physical evil, or by a fear of running out of the material goods that each
class of its individuals needs as a result of their habits.

3. Powers of the production factors should be continuously increased. Meaning, the final product
should be again invested to increase further production.

4. The fourth proposition is known as the diminishing law. Increment of labor will increase
production but not in the same proportion.

Senior on Utility maximization

No matter how unequally income is distributed, Senior claimed that "everyone has some unfulfilled
wishes that he believes additional wealth would satisfy ; ... every person has some unsatisfied
wants." In addition, "each individual's wants are as diverse in their nature and degree of urgency

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as the diversity in human character." As a result, it is impossible to compare how much utility
different people might gain or lose from an increase or decrease in their wealth.

Senior on Prices

Prices reflect the utilities that people receive from using the various goods rather than the labor
that went into making them. Senior emphasized that the value of goods exchanges in proportion
to the strength or weakness of the forces which give them utility. He claimed that they would gain
or lose from an increase or decrease in their wealth.

Senior on Glut

Neither economic gluts nor falls were unimaginable. He argued that there could never be a general
surplus of goods if the desire for money was bottomless.

Senior's Views on Population and Workers’ Welfare

Senior argued that the only way to reduce poverty is to raise the moral and intellectual character
of the laboring population. Senior stressed that the only alternative to "moral and physical evil" in
controlling population was the "fear of deficiency." Senior believed it to be absolutely necessary
to keep the working class living in a constant and extreme "fear of deficiency," and he believed
that the older poor laws had lessened this fear by giving workers a minimal level of security.

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Senior's view on capital accumulation and abstinence

Production is influenced by the two productive elements, namely labor and capital. Abstinence
was required because these components weren't sufficient as a secondary agent. Senior emphasized
that abstinence could lead to capital formation. According to him, the term "abstinence" refers to
a person's behavior when they refrain from using their resources in an unproductive way.

Senior's view on land

Due to a lack of fertile land, labor was applied to less productive fields, which led to diminishing
returns on both labor and investment. Because of this, the owner of better land demanded rent. The
cultivation of inferior lands and the scarcity of superior lands determined the value of the land.
Land had no value if only a portion of the most productive land was cultivated. Rent would
therefore continue to exist as long as a limited resource was being utilized.

Senior's view on class distribution of income

Senior's claim that a significant portion of what are typically referred to as wages and profits
contained a rent component was the most crucial part of his discussion of rent. A portion of a
worker's or capitalist's pay or profits would actually be rent if they had an advantage over their
competitors. He argued that differences in the productivity of workers or machines were not
fundamentally distinct from variations in the fertility of the soil. This was significant because it
was the first link in a series of steps Senior took to essentially eliminate the differences in the
incomes of the different groups. If all sources of income were equivalent, the identifying
distinction of different classes became economically irrelevant - and finally First and foremost
among senior-influenced thinkers arose the belief that capitalism evolved.

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Social harmony vs the political economy of the poor

Classes were naturally antagonistic and working class would benefit from actions that harm the
interests of landlords and capitalists and thus were labelled as the political economy of the poor.
Social Harmony was that all interests were in harmony and were promoted by a free market and
the accumulation of capital. In the Mid-nineteenth century, industrial capital was clearly supreme.
Capitalists stepped away from entrepreneurship or organizing production, began to rely on hired
managers. Profits became a passive ownership, like rent. Distinctions became unimportant.
Arguments were, there's a difference between income from working and income from owning.
Also, fundamental ongoing class antagonism. Abstinence is a social cost of production borne by
capitalists. Senior Agrees that, in capitalism, capitalists enjoy making profits. Vanity encourages
the upper classes to save rather than spend. Among the educated classes, vanity was "the most
powerful of human passions." “The desire of wealth for its own sake" seems "instinctive",
"implanted in us by nature as a counterbalance to the strong propensities to indolence and to
expenditure". When not trying to justify profits morally, he made observations that "refute his
assertion that abstinence was among the most painful exertions of the human will”.

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 Frederic Bastiat

Foundation and Scope of Bastiat's Utilitarion Economics

Frederic Bastiat (1801-1850) attempted to establish the modesty of private property, capital, profit,
and the existing distribution of wealth. In general, he introduced competitive Laissez-faire
capitalism consistently by extending the principles of utilitarianism into economic theory.

The title of Bastiat's most important book, Economic Harmonies, which showed the importance
he placed on refuting the notion that class conflict was inherent in capitalism. Making the claims
that "exchange is political economy" and that "political economy is restricted to the area we call
business, and business is under the influence of self-interest,"

Bastiat set out to prove that "all men's impulses, when motivated by legitimate self-interest, fall
into a harmonies social pattern". He addressed his book to all classes and promised to prove that
laissez-fair capitalism was the best possible economic system for everyone.

Distinction between Two Schools

In defense on his doctrines, he (like Senior) claimed the authority of science. In discussing the
distinction between "scientific" political economy (where his favorites were clearly Say and
Senior) and Socialism (where his opponent was clearly Aroudhon). He thinks the great division
between the two schools is made by the difference in methods. And like Malthus, Bastiat placed
the authority of religion in defense of his doctrines.

Having thus established the scientific and religious superiority of his ideas Bastiat began a
comintent development of utilitarian economics.

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Neoclassical Utilitarian Economics

In neoclassical utiliterian economics, all economic, social, and political interactions among human
beings once reduced to acts of exchange. Once such a reduction is made, the result is obvious.

It was in the writings of Bastiat that the utility approach was first consistently developed so as to
reduce all economic theory to a more analysis of market exchange, "Exchange is political
economy" Bastiat declared, "it is society itself, for it is impossible to conceive of society without
exchange or exchanges, without society."

To defense the modesty of the laws of private property he asserted: Private property was a natural
law created by God and existing before any man-made laws. Therefore, human laws that
recognized this conformed to natural love and God's will; human laws that recognized infringed
on property rights were unnatural and contrary to God's will.

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