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Bonus Quotation of the Day…

… is from pages 555-556 of  Francis Ysidro Edgeworth‘s December 1908 article in the Economic Journal titled  “Appreciations of Mathematical Theories” (footnote deleted; original emphasis); the Bickerdike who Edgeworth refers to is Charles F. Bickerdike, who refined, in early 20th-century papers, the formal theory of the optimal tariff:

Thus the direct use of the theory [of optimal tariffs] is likely to be small. But it is to be feared that its abuse will be considerable. It affords to unscrupulous advocates of vulgar Protection a particularly specious pretext for introducing the thin edge of the fiscal wedge. Mr. Bickerdike may be compared to a scientist who, by a new analysis, has discovered that strychnine may be administered in small doses with prospect of advantage in one or two more cases than was previously known; the result of this discovery may be to render the drug more easily procurable by those whose intention, or at least whose practice is not medicinal. It was thus that the “drama of poison” perpetrated in the reign of Louis XIV. was initiated by one whose baleful receipt was obtained from Glaser, a chemist of eminence, the discoverer of a new substance. Let us admire the skill of the analyst, but label the subject of his investigation POISON.

DBx: Yes.

Close readers of Cafe Hayek might notice that I often write of the case for a policy of free trade – indeed, for a policy of unilateral free trade. I regard such a case as being related to, but distinct from, a theoretical case for unilateral free trade.

In theory, all sorts of things are possible in reality. In reality, very few of the set of things that are possible in theory will ever occur. Therefore, the countless things that are merely possible but not plausible are rightly ignored when discussions turn to choosing the rules under which we imperfect human beings live and govern our interrelationships with each other. Any policy that deserves the name is a set of rules. And no policy can be concerned with mere theoretical possibilities, most of which are nothing more than curiosa that are good for little beyond giving puzzle-solving-like entertainment to assistant professors and graduate students.

The theory of the optimal tariff is such a curiosa. It is widely and not unjustifiably regarded as supplying one of only two theoretically coherent exceptions to economists’ demonstration that the wealth of the nation is maximized with a policy of unilateral free trade. (The other exception – which is related – is the theoretical possibility that the government of country A can use tariffs to persuade other governments to lower their tariffs, all toward the ultimate goal of a multinational reduction of tariffs. And perhaps a third such theoretical ‘justification’ is “strategic trade theory.”) But as Edgeworth wisely and eloquently implies above, the theory of the optimal tariff supplies no good basis for a policy of protectionism – or, from the other side, for abandoning a policy of free trade. And had Edgeworth lived to see the work done by public-choice scholars – as well as that done by Austrian and some Chicago economists on the dynamic and rivalrous nature of market competition – he undoubtedly would only have reinforced his description of the theory of the optimal tariff as poisonous.

Contrary to what some commenters in their ignorance assert – at this and other blogs – the theory of the optimal tariff was never regarded by any but the smallest number of economists as a serious argument against a policy of free trade.