I Prefer Free Trade

by Don Boudreaux on August 24, 2017

in Myths and Fallacies, Trade

Here’s a letter to the New York Post:

Errors of logic and fact infect Betsy McCaughey’s defense of the Trump administration’s protectionist policies (“Trump is not backing down on trade,” August 23).  No error is worse than the one she opens with: “Most shoppers prefer to buy American. But given a choice between an American-made product and a cheaper import from China, Mexico or another low-wage country, they’ll usually go for the bargain.”

Ms. McCaughey’s use of the word “prefer” is contorted.  When analyzing economic activities, it makes no sense to speak of preferences over different options independently of the different costs of those options.  If we ignore costs, then all sorts of mistaken conclusions follow.  For example, because if Lamborghinis were priced the same as Fords Americans would buy more Lamborghinis than Fords, we would therefore conclude that most Americans prefer Lamborghinis to Fords.  This conclusion is mistaken because the cost of any option, relative to the costs of other options, is as important and real an aspect of that option as are any of that option’s other qualities, such as its physical design and country of origin.

Ms. McCaughey concludes that Americans will be made better off by policies that artificially push the prices of imports up to those of more-costly American-made counterparts.  This conclusion springs from her mistaken belief that Americans who buy lower-cost imports really “prefer” American-made goods to imports.  Yet if this conclusion were correct, it would also follow that, because most Americans really “prefer” Lamborghinis to Fords, Americans would be made better off by policies that artificially push the prices of Fords up to those of more-expensive Lamborghinis.

If you see that Americans would be harmed and not helped by such a policy of artificially raising the prices of lower-cost automobiles up to those of higher-cost counterparts, you should see also that Americans would be harmed and not helped by a policy of artificially raising the prices of lower-cost imports up to those of higher-cost American-made counterparts.

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

(HT Reuvain Borchardt)

Many conservatives these days have upped their efforts in competing with “Progressives” to see which group can stuff the greatest number of economic fallacies into 750 words.

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