Here’s a letter to a new correspondent.
Mr. Wynn:
Thanks for sharing this tweet by Social-Identity-Thief. The point that Mr. Thief seems to make – one that you expressly endorse – is that, because all taxes raise some prices, my pointing out that tariffs raise some prices does not undermine the case for protectionism. “The case for tariffs,” you conclude, “remains a powerful one.”
Well.
My response (in support of John Puri, who got this discussion rolling) was to Michael Brendan Dougherty’s argument that tariffs, in the long run, lower prices. Mr. Dougherty writes in the centuries-old protectionist tradition that holds that obstructing fellow citizens’ access to goods and services that are produced abroad miraculously increases those citizens’ overall access to goods and services – that is, makes goods and services in the home country more abundant and, hence, available at lower prices.
You and the tweeting Mr. Thief overlook the context of the discussion. But let me make one more point.
Of course all taxes raise some prices. But it’s wrong to leap from this trivially true fact to the conclusion that “the case for tariffs remains a powerful one.” The best economic case for taxes is that they’re necessary to pay for “public goods” – goods that cannot practically be supplied by private market actors. Taking account of notions of fairness and of economic efficiency, economists have spilled oceans of ink exploring how best to levy such taxes. Although legitimate disagreement on this front continues among economists, all serious participants in these scholarly discussions acknowledge that every tax regime will cause the prices of some things to rise relative to those of other things.
As for the case for relying on tariffs as a source of revenue, it’s weak – as explained by (among others) Brian Albrecht.
To repeat my main point: The dominant economic case for protectionism – including the thrust of the Trump-MAGA case – is that tariffs supposedly create a greater abundance of goods and services in the domestic economy and thereby reduce all prices. The dominant economic case against protectionism, then, is to expose the many fallacies that motivate this protectionist case. So contrary to what you and Mr. Thief believe, you have not caught me in a “Gotcha!” by noting a fact that neither I nor any other proponent of free trade has ever denied, namely, that all taxes cause some prices to rise.
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
