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Oren Cass’s Response Fails

Here’s a letter to a reader of both Cafe Hayek and Law & Liberty:

Mr. Y__:

Thanks for your e-mail.

Of course I’ve seen Oren Cass’s response today to my, as well as to Phil Magness’s, criticisms of his case against free trade. Cass continues to rely heavily upon portraying today’s proponents of free trade as mindless members of a modern cult. Intelligent readers will detect that very little substance lies beneath his mocking terms and characterizations. He devotes a disproportionate part of his response to an exegesis of Alfred Marshall’s work. I could (as could Phil) tangle with him about the context in which Marshall wrote, and challenge his portrayal of Marshall as an early proponent of industrial policy. But I’m in no mood to conduct a seminar on the history of economic thought.

So let’s here stipulate – contrary to fact – that Marshall was indeed a precursor of Oren Cass. Heck, let’s stipulate also that Adam Smith, David Ricardo, Frédéric Bastiat, and every economist until the interwar years was really a staunch protectionist in free-trade drag. The case for protectionism isn’t much advanced. A critical question left unanswered – because it’s unasked – by Cass is “From where will government officials get the information they must have if they are to use tariffs and subsidies in ways that improve upon the market’s allocation of resources?” Modern economics offers a substantive account of how individuals acting in markets, both domestic and international, obtain and act on information in ways that, over time, improve patterns of resource allocation and promote widespread economic growth. Oren Cass and other protectionists, in contrast, offer only assertions that the officials in charge of tariffing and subsidizing will somehow outperform markets.

Search carefully in Cass’s work, or in that of other protectionists. You’ll find no substantive account of how the real-world information required for their schemes to work as promised will be acquired. Cass & Co. simply ignore this central issue. It’s very easy to say that government officials will protect those particular industries whose growth will prove more favorable to the economy than would the industries that rise and expand with free trade. But this claim must be backed with at least an attempt at substantive explanation. How do the planners know that industries A and B will prove better over time than industries C and D? And even if Cass & Co. are correct that such knowledge can indeed be divined by government officials, how do these officials know that the costs of engineering the transition from industries C and D to industries A and B will be justified by the resulting benefits?

Again, what’s needed for Cass & Co. to have any hope of carrying the day intellectually is to offer substantive answers to these (and related) questions. Uncovering textual evidence that some economist – or legions of economists – from the past might have had doubts about the merits of free trade doesn’t count.

Speaking of substantive arguments, notice that, in his response, Cass ignores the substantive arguments that both Phil and I made against his brief for protectionism. Cass ignores Phil’s explanation that 19th-century American economic growth cannot credibly be ascribed to that era’s tariffs. He ignores my point that, in his January 2nd piece, he truncated the data to create the false impression that U.S. trade deficits are responsible for the recent stagnation in worker productivity. And he says nothing about my demonstration that his understanding of the balance of trade is indefensible. This last point especially is one that he can’t jauntily avoid by asserting that he understands it but simply disagrees with it. Treating the trade deficit as if it is necessarily debt is plain wrong, by definition. And his finding economic meaning, in our world of more than two countries, in America’s so-called trade deficit with China alone testifies, not to his disagreement with economists, but to his feeble grasp of economics.

Protectionism is a bankrupt theory – largely because it’s hardly a theory at all. It is more a mash-up of baseless assertions, dreamy fantasies about the magnificent powers of the state, and tendentious excuses for the greedy or the arrogant to force their will on the general public.

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

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