Bad Arguments for Good Policies

by Don Boudreaux on September 23, 2014

in Economics, Myths and Fallacies, Trade

In my latest column for the Pittsburgh Tribune-Review, I flag some frequently encountered bad arguments for policies that I regard as sound.  A slice:

One bad argument is that high tariffs and other forms of protectionism decrease the number of jobs in the home market.

In fact, protectionism does not decrease employment. Nor, however, does protectionism increase employment. What protectionism does is shift workers from jobs that are more productive into jobs that are less productive.

The number of jobs in an economy is determined by the size of that economy’s labor force and by conditions in the domestic labor market. For example, government policies, such as ObamaCare, that artificially raise firms’ costs of employing workers will result in fewer domestic jobs.

But preventing consumers from buying foreign-made products neither causes workers to leave the workforce nor raises firms’ costs of hiring workers. Such protectionist policies merely increase demand for workers in the protected industries. But these workers are drawn to these protected industries from other domestic industries.

The bottom line is that the case for free trade is harmed, not helped, whenever champions of free trade assert that protectionist policies mean fewer jobs.

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