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The Choice

Here’s a letter to a regular e-mail correspondent:

Mr. Carroll Shiffrin

Mr. Shiffrin:

You claim that the findings of a recent study by the Equality of Opportunity Project “show why droves of Americans want government to defend our American dream … by protecting us from foreign trade upheaval.”  Your claim is ironic.

According to the study that you cite, the percentage of Americans who earn more than their parents has steadily fallen since at least 1970.  (Let’s ignore here flaws in the study, including the fact that it adjusts for inflation using the Consumer Price Index, which is widely agreed to overestimate annual rates of inflation.)  If and to the extent that this finding is accurate, protectionism is surely among the causes; protectionism is not among the cures.

Protectionism invariably protects existing industries, firms, and jobs – and, likely, ones that also operate at comparative disadvantages in global markets.  All resources that protectionist policies artificially keep embedded in existing, older, and inefficient lines of production are thereby prevented from being used to experiment with, and to launch, newer, more innovative, and more-efficient lines of production.  ‘Seen’ existing jobs – such as steelworker, farm laborer, and carpenter – are maintained at the expense of ‘unseen’ jobs, many of which do not yet exist, but nearly all of which would be more productive – and, hence, higher paying – than are the old, existing, familiar jobs that are kept on life-support by tariffs and other protectionist policies.

I ask you: would it make sense for someone who desires higher income in the future to refuse to go to college today on the grounds that doing so requires that she spend less time today working at her current job as a supermarket cashier?  Of course not.  This person’s ability to earn higher income in the future requires that she today devote less of her time and labor to her current lower-paying (if comfortably familiar) job.  The same is true at the economy-wide level.  If we really want our children to earn higher incomes than we now earn, we must be willing to release resources today from their current, familiar uses so that these resources are available to create new, as-yet-unknown industries that can survive without the artificial and confining life-support that is protectionism.

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


The very best explanation of this phenomenon remains Russ Roberts’s marvelous little book, The Choice.  If you’ve not yet read this great book, do so.  If you’ve already read it, read it again, as I do at least once each year.

UPDATE: On the question of the economic fate of today’s generation compared to the fates of previous generations, see this essay by Steve Horwitz.