Primitive Minds

by Don Boudreaux on February 22, 2017

in Crony Capitalism, Myths and Fallacies, Seen and Unseen, Trade

Here’s a letter to a new and intrepid correspondent:

Mr. Nolan McKinney

Mr. McKinney:

You point to Harley-Davidson’s resurgence, after Ronald Reagan drastically raised tariffs on imported large motorcycles, as “evidence of protectionism strengthening our economy.”

Harley’s resurgence is evidence of no such thing.  The argument against protectionism is not that it doesn’t help the particular firms that are shielded from the competition of foreign rivals.  Of course protectionism helps such firms.  The chief economic argument against protectionism is, instead, that the gains that it creates for protected producers come at the greater expense of consumers and of other domestic producers.  Reagan’s tariffs diverted resources artificially to Harley-Davidson.  Those resources came from somewhere.  What goods and services were consumers thereby unable to purchase?  What firms were thereby unable to get the resources they needed to expand or to be launched?  What new jobs weren’t created?  What workers failed to get raises?  And how many motorcyclists were killed or maimed because, given the tariff-induced higher price of new motorcycles, these motorcyclists put off buying new bikes while they rode their older and more-rickety bikes longer than otherwise?  Harley’s post-tariff success unlikely compensates for these losses.

But even if, by some weird chance, that specific 1983 tariff did improve Americans’ overall economic welfare, it still does not constitute a case for protectionism.  As the great trade economist Harry Johnson wrote, “To the primitive mind, one case of magic’s working (or seeming to work) is sufficiently impressive to confirm faith in magic against a long series of experienced failures.”*  In other words, to embrace protectionism because of one or two successes (or apparent successes) is primitive.  America’s public policies should not be primitive.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* Harry G. Johnson, “Mercantilism: Past, Present, and Future” (1973), reprinted in H.G. Johnson, On Economics and Society (Chicago: University of Chicago Press, 1975), page 274.

A still-excellent read on the 1983 Harley tariff is this 1984 paper by my colleague Dan Klein.

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