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An Open Letter to Warren Platts

Mr. Platts:

Commenting on this blog post, you describe tariffs as “merely a Pigovian tax on the negative externalities caused by free trade.” If you’re correct, there’s nothing “merely” about the matter, for implicit in your description of tariffs is a wholesale rejection of the competitive market order.

Sales losses experienced by domestic producers as a result of imports are a negative externality only if producers have a property right in all sales that they make. Yet if producers have such a property right, then producers no longer must compete for and continue to earn consumers’ business. Such an economy would be run for producers; people as consumers would be little more than slaves who are obliged to spend their incomes in ways that maintain the current, never-to-be altered pattern of production. Incomes paid by producers to their workers and other suppliers would effectively be the property of existing producers rather than of the workers and other suppliers who earn those incomes.

In short, in such an economy, competition – far from being encouraged as it is in market economies – would be treated as a tort. If your notion of property rights were generalized and implemented, all of humankind would rapidly revert to a subsistence existence. People would die by the billions.

Of course, you aren’t interested in generalizing your notion. You want the convenience of applying it only when it suits you – namely, to plead for protection exclusively against competition that happens to come from foreign producers. But such haphazard and inconsistent theorizing is unacceptable. Producers either do or they don’t have a property right in all sales that they make. Consumers either don’t or they do have a right to spend their incomes as they choose. There’s no justification in economics or ethics for assigning to producers property rights only to sales that they lose to imports, for there is nothing remotely relevant, economically or ethically, about the geographical origins of the goods and services that consumers choose to buy.

I leave you with this challenge: if, as your claim implies, you really believe that producers have a property right to all sales that they make, then demonstrate by your actions that you are a man of principle. You must do so by committing never to decrease the amount of income that you spend on the outputs of each and every one of the suppliers that you now patronize.

If you tire of dining at a restaurant that was long a favorite of yours, too bad; you must keep dining there. If you buy a new car that’s more fuel-efficient than your old car, too bad; you must continue to purchase the same quantity of gasoline each week as you purchased in the past. If you or a loved one contracts a serious illness that requires expensive medical care, too bad; you may not reduce your spending elsewhere in order to pay for this care.

Unless you are personally willing to conduct all of your own economic affairs consistently according to the ethical principle implicit in your defense of tariffs, it is hypocritical of you to demand that the state force other people to behave, even occasionally, according to that principle.

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