Here’s a letter to National Review.
Editor:
Michael Brendan Dougherty accuses me of dancing around his core defense of tariffs (“On the Origin of Straw Men,” October 18). He protests that all he meant to say about tariffs is that they can – through a Hayekian discovery process – cause protected domestic industries to lower their costs below pre-tariff levels. I concede that this outcome is imaginable. But it’s imaginable only in the way that one can imagine a person surviving a free fall off of the top of a skyscraper by landing just right in a gigantic drift of downy snow.
First, Mr. Dougherty denies that he had in mind the most obvious mechanism by which tariffs might enable protected firms to lower their costs – namely, allowing these firms to take advantage of greater economies of scale. He will, I hope, forgive me for assuming that he had this mechanism in mind.
Second, Mr. Dougherty mysteriously supposes that firms will work harder to discover lower-cost means of production when government weakens the competitive pressures that spur them to do so. In his imaginary world, firms obliged by global competition to sell at low prices will exert little effort to discover how to lower their production costs, but firms will intensify their efforts to discover lower-cost means of production when protected from foreign competition – and, hence, able to sell at higher prices. As I say, one can imagine this outcome. But it’s as plausible as a student’s plea to me that he would study harder only if I were to guarantee that I’ll not assign to him a grade lower than A-minus.
Hayek’s insight is that competition is a discovery procedure precisely because no one can know in advance which methods of production, which industries, or which patterns of specialization will prove most economical. Tariffs obstruct this discovery process by artificially favoring some producers at the expense of others.
Third, judging from the tenor and context of his remarks, Mr. Dougherty’s case for tariffs – like Trump’s – is that these levies enrich Americans generally. Therefore, it was perfectly justifiable for John Puri, and me, to challenge Mr. Dougherty’s implication that tariffs are a sound means of improving the overall performance of the American economy. For Mr. Dougherty to retreat to the position that all that he was arguing is that it’s possible for tariffs to cause protected industries to lower their costs and prices, without any implication for the broader economy, is illegitimate.
Finally, like most protectionists, Mr. Dougherty flavors his protectionism with claims about national security. National security is a legitimate concern. But in this context it’s a red herring. If national security is the justification for tariffs, then the case for these tariffs must rest on their contribution to national security, not on speculation that they will lower production costs and prices.
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
