Here’s a letter to a new correspondent:
Mr. S__:
Thanks for your e-mail in which you accuse me of being “an inconsistent economist.” My alleged inconsistency arises from me, on one hand, recognizing that not all benefits are worth the costs of obtaining them, and, on the other hand, favoring unlimited free trade. “There comes a point,” you conclude, “where the benefits of more imports are no longer worth their costs. Tariffs are a way for ensuring we don’t import beyond this point.”
With respect, I’m afraid you’re confused. Forget that there’s no reason at all to suppose that, if there were a single nationwide ‘optimal’ level of imports, government officials can be trusted to know what that level is and to pursue it apolitically. The more fundamental error in your reasoning is that there is no one ‘optimal’ level of imports. Instead, there are millions of different optimal levels. There’s an optimal level of imports for you and a likely different one for me and yet another, different still optimal level for your next-door neighbor. For each American adult, there is an optimal level of imports – a level that is unlikely to be identical to that of any other American. In the U.S., there are today more than three-hundred million different optimal levels of imports.
Fortunately, there’s a built-in mechanism in the market to ensure optimality of imports for each person. This mechanism is the price system, which informs and incites each person to buy imports up to, but not beyond, his or her optimal level. You’ll buy imports as long as the satisfaction that you expect to get from consuming those imports exceeds the costs that you incur to purchase them; you’ll not buy any imports that you believe are not worth their costs. And what’s true for you is true for me and for every other individual who is left free to spend his or her – and only his or her – money as he or she chooses.
There is absolutely no need for government to superintend such spending decisions. Quite the opposite. U.S. government interference with trade ensures that the level of imports (and also, by the way, the level of exports) is suboptimal for nearly every American. So, if you’re truly interested in ensuring that we Americans import ‘optimally,’ you should join me in the ranks of free traders.
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
