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… is from page 101 of Randy Holcombe’s insightful 2018 book, Political Capitalism: How Economic and Political Power is Made and Maintained [2] (footnote deleted):
Tariffs create a trade barrier that raises the cost of imports and therefore allows domestic sellers to charge more – a transfer from buyers to the sellers of domestic goods who are protected by the tariff that raises the price of competing imports. Tariffs interfere with voluntary market exchanges, reducing productivity and lowering incomes. Standard economic analysis recognizes this welfare loss, but [Gordon] Tullock goes on to note that tariffs are a product of government, and that those protected by the tariffs use real resources to lobby to put them in place. Those resources used to engage in the political process to establish the tariffs – the Tullock costs – are also welfare losses.
DBx: Yes.
Unfortunately, this reality – one so undeniable and so well-known to sensible people – is completely lost on the likes of Daniel McCarthy, Julius Krein, Oren Cass, Marco Rubio and others who plead for government to be given more power over resource-allocation decisions.
McCarthy, Krein, et al., not only ignore the public-choice [3] problems of empowering government in the ways that they wish government to be more empowered, they also completely fail to answer this question: how will government officials acquire the detailed, local, and ever-changing information necessary to override market processes in ways that improve upon those processes?
These ‘men of system’ don’t bother even really to ask the question, much less to answer it adequately. When they address the question at all, they think it sufficient to say something along the lines of ‘Because we’re not calling for maximum-possible intervention, we can ignore the annoying question of just how government officials will get the knowledge necessary to improve on market processes by overriding these processes.’ That is, when they appear to offer answers to the question, their answers amount to nothing more than veiled confessions that they have no answer to the question. They merely assume the knowledge problem away by insisting that it doesn’t apply to their particular proposals, and accusing anyone who argues otherwise of being trapped by an obsession with “simplistic absolutisms.”
Having no answer to this question about how a handful of government officials spending other people’s money will acquire and process detailed knowledge used in markets daily by hundreds of millions of on-the-spot individuals each spending his and her own money, these ‘men of system’ naively assume that such knowledge is accessible to government official and will be processed and applied apolitically rather than politically.
The move made by McCarthy, Cass, and other proponents of protectionism and industrial policy is the intellectual equivalent of a person insisting that it is perfectly reasonable and scientific to predict the future by using Tarot cards. Sadly, that is the intellectual level at which these people operate when they call for protectionism and industrial policy.