Here’s another letter to my long-time protectionist ‘friend.’
Mr. McKinney:
Calling my latest reply to Michael Brendan Dougherty “an example of knee jerk globalism,” you advise me to think more “creatively.” Specifically, you believe that Mr. Dougherty correctly invokes Hayek to support the protectionist argument that tariffs, if kept in place long enough, would, in your words, “give our firms enough breathing room, resources and motivation to grow their efficiencies.”
With respect, your claim defies credibility. When you encounter bad service from a restaurant, from an auto-repair shop, from a dry cleaner, or from some other merchant, do you continue to patronize that merchant? Are you unhappy that you have alternatives to this merchant? Do you think to yourself, ‘If only this merchant had fewer competitors, his service would improve’? Do you volunteer to pay higher prices to this merchant in exchange for his bad service in the belief that doing so will give him “breathing room, resources, and motivation” to improve his service? Or do you take your business elsewhere?
Tariffs reduce the competitive pressure on firms, which is to say that tariffs weaken firms’ incentives to please their customers. In short, tariffs create monopoly power.
The title of the Hayek article that Mr. Dougherty bizarrely cites in support of tariffs is “Competition as a Discovery Procedure,” not – as Mr. Dougherty and you seem to think – “Monopoly as a Discovery Procedure.”
Sincerely,
Don
