Here’s a letter to a long-time, valued correspondent and reader of my blog.
Steve:
Thanks for your thoughts on Jeff Ferry’s reply to my open letter to him. You accurately identify a main difference between Jeff’s position and mine: He believes, as I do not, that tariffs, by protecting key domestic industries from foreign competition, usefully promote long-run economic growth for the country writ large.
As you know, at my blog and in other writings, I have – as have many other economists (more skillfully than me) – reviewed the many reasons why it’s folly to expect politicians and bureaucrats to obstruct economic freedom in ways that result in the economy performing better than it would absent these obstructions. I repeat here the core economic argument: We economists have a coherent and empirically verified theory for how market participants are given both the information and incentives that are necessary to allocate resources away from less-productive and toward more-productive uses. Protectionists, in contrast, have no such theory. They simply assert that government officials know more than markets know, and are better than markets at acting on this knowledge.
Put differently, protectionists assume away one of the central challenges that every economy faces: How to obtain and use as much knowledge as possible about how resources can be more-efficiently allocated? The typical protectionist talks and writes as if he or she possesses this knowledge, yet the typical protectionist never bothers to tell us how he or she came by this precious information.
Another point is worth mentioning. You write that it “seems … you both would agree that harm [from trade] in the short run is not a debatable point.” Not so; I do debate it. Although it’s commonplace even among free traders to say something like “of course trade has short-run costs,” such a statement is misleading. It implies that, in destroying particular industries and jobs, international trade is unique.
But trade isn’t unique: Any and all market-driven economic change destroys some industries and jobs as it creates others. Changes in dietary habits, clothing styles, and educational choices – the introduction of labor-saving technologies – the entry of more women into the workforce – these and any other economic changes you can name destroy some particular firms and jobs and create others.
No one says, for example, that an increase in the number of Lutheran entrepreneurs means that increased entrepreneurship among Lutherans imposes short-run harm. Yet the economic consequences that people have in mind when they talk of trade imposing harm in the short-run are no different from the economic consequences that would arise if Lutherans became more entrepreneurial. This entrepreneurship, no less than increased foreign trade, would destroy some particular firms and jobs.
It’s simply incorrect to single out trade as a unique source of economic ‘harm.’
My apologies if the above is pedantic. But language matters. One reason protectionists easily persuade the public to swallow their snake oil is that even free traders, fearful of coming across as extreme, allow protectionists to get away with using misleading language.
Sincerely,
Don
