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Please, People, Learn Some Basic Economics

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Here’s a letter to the editor of Law & Liberty:

Editor:

Because I’m no expert on the works of Edmund Burke, I can only trust that Gregory Collins is correct that “the idea that trade can, and should, be used as an instrument of leverage and power against hostile foreign countries – such as those, like China, that wage economic warfare and cyberwarfare against you – was not anathema to Burke’s economic thought” (“Burke’s Political Economy Reconsidered [2],” November 21). But having some expertise in economics, I am justified in issuing a warning against any such use of protectionism.

First, history – which Burke correctly understood to be an excellent teacher – teaches that protectionist policy is almost never carried out scientifically and with the aim of promoting the public welfare. In reality,  protectionist policy is overwhelmingly designed to further the narrow interests of politically powerful domestic producers, all without regard for the good of the general public. (For the United States, see Douglas Irwin’s definitive history of U.S. trade policy, Clashing Over Commerce [3].) These producers and their political champions, of course, never hesitate to wrap themselves in the flag in order to con the public to support their predations.

There’s an irony here: protectionism carried out in the name of strengthening national security risks weakening it by making the domestic economy less innovative and less prosperous. Protected producers, after all, have fewer incentives to improve their products and to operate as efficiently as possible.

Second, any writer who deploys, as does Mr. Collins, the term “wage economic warfare” alerts economically literate readers that the writer likely is confused about economics.

As used in trade-policy discussions in the U.S., “economic warfare” almost always refers either to policies – specifically, foreign-governments’ subsidies of their countries’ exports – that bestow on Americans positive benefits, or to policies – specifically, foreign-governments’ use of protective tariffs – that deny to Americans nothing to which any American has a right. And in all cases these foreign-government policies inflict far more economic damage on their own citizens than they inflict on Americans.

There’s an irony here, too: protectionist weapons unsheathed by the U.S. government in the name of defending against “economic warfare” waged by other countries are weapons that the U.S. government wields chiefly against Americans. “Economic warfare” is war waged by each government against its own citizens, with each belligerent pursuing the economically harmful goal of increasing as much as possible its country’s exports and decreasing as much as possible its country’s imports.

The fact that Mr. Collins apparently believes that the U.S. government should take up economic arms in such an absurd and self-destructive “war” means that, while his expertise in Burke’s writing might be impeccable, his understanding of economics clearly is not.

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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