An Open Letter to Alan Tonelson

by Don Boudreaux on August 29, 2018

in Myths and Fallacies, Seen and Unseen, Trade

Alan:

Tweeting on my colleague Veronique de Rugy’s pro-free-trade piece in today’s New York Times, you claim that she “unwittingly” makes the case for even more tariffs. Specifically, you claim that Veronique’s correct observation that U.S. tariffs on the likes of steel raise the prices that many American manufacturers pay for inputs “makes the case for tariffs on downstream industries” – tariffs that would enable downstream industries to charge higher prices for their outputs and, thus, to cover the higher costs they suffer because of tariffs on their inputs.

You miss the fact that the ultimate downstream buyers are consumers. And because consumers buy in order to consume rather than to produce and resell, it’s impossible to use yet additional tariffs to protect consumers from the higher prices caused by tariffs. These higher prices unavoidably harm consumers by obliging them to buy fewer units of all goods and services whose prices rise because of tariffs.

You’ll disagree, asserting that tariffs cause consumers’ incomes to rise and, thus, permit consumers to afford the higher prices. Yet this assertion – like your original point – is akin to arguing that the way to protect people whose homes are burgled from suffering losses from burglary is to encourage these victimized homeowners themselves to burgle other people’s homes.

Protectionism is like burglary. Just as the additional wealth gained by some burglars does not mean that, therefore, everyone would gain additional wealth if everyone burgled, the additional wealth gained by some protected producers does not mean that, therefore, everyone would gain additional wealth if all producers were protected. Expanding the population of those who prey on others – whether through overt theft called “burglary” or through covert theft called “protection” – paves the way to poverty, not prosperity.

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

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