- Cafe Hayek - https://cafehayek.com -

100-1≠60 and 60+1≠100

Tweet [1]

Here’s a letter to a typical politician, U.S. Senator Marco Rubio (R-FL):

Sen. Rubio:

I just learned at World Trade Online [2] of this astonishing March statement of yours: “Washington’s willingness to sacrifice entire domestic industries and local production just to shave pennies off the costs that American consumers might pay for products is one of the main reasons why Donald Trump is president today.”

You need tutoring in both economics and arithmetic.

Central to your argument is your suggestion that when we Americans buy lower-priced imports our total savings is only very modest – so modest that, you imply, Americans on net benefit from tariffs which lead us to purchase fewer imports.

Well now.

Economics demonstrates [3] that, except under the rarest of circumstances, the gains that free trade bestows upon the citizens of any country are greater than any accompanying costs.

But you can be excused for flubbing economics.

You cannot, however, be excused for flubbing arithmetic. And arithmetic is clear that if, as you suggest, the total amount of money that we Americans save by purchasing imports is very small, then it follows that the total amount of additional money that we Americans, when prodded by tariffs, will spend on American-made products will also be very small.

Put differently, you argue, in effect, that 100-1=60 and that 60+1=100. You will note that this arithmetic is wrong. And I note that your analysis of trade is just as wrong.

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

Comments