… is from page 178 of Steven Landsburg’s 2009 book, The Big Questions:
Imported plywood is taxed [that is, tariffed] at about 40 percent, which props up the price of American plywood. If that’s the only reason you’re selling plywood, you’re basically a leech.
That’s perhaps not obvious. At least I hope it’s not, because it took me a good twenty minutes (and the help of two colleagues) to get it right. But here’s the accounting: A foreign sheet of plywood is available for (say) $5 plus $2 tax. Therefore American suppliers can get $7 a sheet, and they do. If you can produce plywood at $6 a sheet, you make a $1 profit….
Even without working through the details, it should be obvious that your plywood business is socially destructive. You are using up $6 worth of resources to produce a sheet of plywood someone in Canada could have produced for $5. That can’t be good.
protectionist scarcityist, seeing only the higher price fetched by U.S. plywood producers and the additional employment in U.S. plywood-producing firms, concludes that Americans as a whole are made wealthier and more fully employed by tariffs.
In addition to misinterpreting artificially raised prices as sources of additional wealth for society rather than as evidence of artificially created scarcity, the scarcityist stubbornly refuses to inquire into the origin of the resources that are diverted by the tariff into plywood production. For the scarcityist, these resources are free; they come from who-knows-where. But these resources, in the blind eyes of the scarcityist, never come from other productive uses.
The scarcityist looks at economic reality through a miniature peephole, and he concludes that there is no reality beyond that which he spies by squinting through his tiny aperture.