Sure, there are gains to the workers and firms protected by tariff walls from their fellow Americans’ ability to trade freely with foreigners. But these protected firms’ resulting higher outputs are produced with resources from elsewhere in the economy. Output and opportunity in other parts of the economy shrink. American firms diverted by tariff walls into producing, say, more steel, rejoice. But this rejoicing ignores the jobs that these tariff walls destroy elsewhere in America and the loss of output from other domestic industries.
It’s easy to rejoice when a wall, literal or figurative, enriches you. And it’s even easier when the destruction wrought elsewhere by that wall is invisible. When a tariff wall causes people in Louisiana and Oregon to pay higher prices for steel made in Pittsburgh, no one can know how they would otherwise have used the extra funds they now pay to Pennsylvania steel producers. But those funds must be diverted from somewhere.
Yet because those somewheres are many, no one domestic industry suffers any great loss from higher steel tariffs. The destruction wrought by tariff walls is dispersed and, hence, invisible. But the sum of the losses is greater than the gain to domestic steel producers.
Americans on the whole are made poorer.
Don Boudreaux, “Mr. Trump, don’t build those walls!”, Pittsburgh Tribune-Review, 2016-11-22.
June 14, 2020
QotD: The seen gains and unseen losses of high tariffs
May 14, 2020
QotD: Anti-dumping laws
As a result, antidumping law as it currently exists routinely punishes normal competitive business practices — practices commonly engaged in by American companies at home and abroad. It is therefore not the case that the law guarantees a level playing field for American companies and their foreign competitors. On the contrary, it actively discriminates against foreign goods by subjecting them to requirements not applicable to American products.
Brink Lindsey and Dan Ikenson, Antidumping Exposed: The Devilish Details of Unfair Trade Laws, 2003.
March 6, 2020
QotD: Mercantilism
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2017-12-17.
February 8, 2019
History Summarized: The Portuguese Empire
Overly Sarcastic Productions
Published on 9 Nov 2018Play World of Warships for free: http://bit.ly/2zyT191. New players will receive 1 MILLION free credits, the historical premium ship HMS Campbeltown and more by using my code PLAYWARSHIPS2018
What happens when you spend a few decades casually getting really good at seafaring, only to find that there’s suddenly a whole new world that’s only accessible to societies with exceptional sailing prowess? — You get fabulously rich, that’s what. Watch along and learn all about the surprising success of Portugal!
PATREON: http://www.patreon.com/OSP
From the comments:
BenficaHaze 1904
1 month ago
Portugal didn’t follow Spain. Portugal started the discoveries 60-70 years before SpainPietro SF
1 month ago
The video already starts badly by suggesting Portugal only entered the Discoveries as a response to the Spaniards, when in reality the Portuguese pioneered the Age of Discovery, starting it half a century before Columbus’ Voyage.Daniel Ghan
1 month ago
Nice video, but 2 significant errors:
1) Columbus didn’t motivate Portugal’s exploration as the video implies; rather, it was the other way around. The Portuguese began searching for a way to India around Africa after the fall of Constantinople in 1453. Columbus, who was Italian, asked the Portuguese king to finance his expedition but was refused, and only then went to Spain.
2) Magellan (Magalhães) was Portuguese but his expedition was sponsored by Spain and he had a Spanish crew. So the expedition would not have returned to Lisbon.Metriximor
1 month ago
Alright, Portuguese here, just wanna say overall you did a great job but I wanna clear a few misconceptions.Portugal didn’t just spring up into action because of Columbus, in fact, he even asked the Portuguese Crown for funding before he asked the Spanish Crown. Portuguese discoveries began in 1418 with Madeira, 1427 we found Açores, then in 1434 Gil Eanes goes around Cape Bojador, 1472 we found Newfoundland, but most importantly, in 1487 Bartolomeu Dias goes around the Cape of Storms, and looking out at the huge possibilities of his accomplishment he declares it to be the Cape of Good Hope.
This was all before Columbus even thought of sailing the Atlantic(1488) or contacting the Spanish(1489), so saying Portugal just began exploring because of him is downplaying it a lot.
Otherwise, fantastic work, love your channel and content keep it up 😀
PORTUGAL CARALHO
August 10, 2018
QotD: Demands for “fair” trade
Whenever you hear someone demand that trade be made “fair” – whenever you hear someone plead for trade to be conducted on a “level playing field” – you can bet your pension that you are hearing a domestic producer, or its spokesperson, soliciting the state for protection from competition. You are hearing sweet words mask a sour plea for monopoly power. You are hearing a greedy corporation or other politically powerful producer group appeal to those who hold power that that power be wielded against fellow citizens who dare to spend their own money in ways that promote their and their families’ best interests rather than in ways that promote the interests of the greedy corporation or other politically powerful producer group.
You are hearing, in short, a seeker of unfair privilege – a demander that the playing field be tilted against consumers’ and society’s broad interests and toward its own narrow interests.
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-11-01.
April 8, 2018
QotD: Just and unjust profits
“Progressives’” hostility to free trade would be amusing were its consequences less baneful: deeply distrustful of the motives of business people, and convinced that profits are ethically suspect, Sandersnistas and many other “Progressives” are in the front lines of the troops who are intent on using trade restrictions to protect business people from competition and, thus, to enhance business people’s prospects of earning excess profits – profits that truly are ethically unjust because they are the fruits of the forced removal from consumers of choices on how they, consumers, may spend their own money. (Of course, the very same economically damaging and ethically unjust consequences spring from trade restrictions supported by Trumpkins and many other conservatives. The tales that each of these economically ignorant groups tell to each other to justify their mercantilist policies differ, but the policies and the harmful results are identical.)
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-07-30.
March 15, 2018
QotD: The self-harming reality of tariffs
Unintended harm to American companies is a recurring problem with tariffs, even those meant to protect American jobs from competition that our government deems unfair. After Bush imposed steel tariffs, steel-consuming industries pointed out that they employed far more Americans than the steel industry itself, and argued that the net effect of the policy on jobs was negative.
Anti-dumping laws, which put tariffs on foreign imports that are supposedly being sold at too low a price, usually target intermediate goods and therefore make the downstream American producers that use them less competitive. Daniel Ikenson, a trade-policy analyst at the Cato Institute, notes that the government, perversely, is forbidden by law from considering the impact of tariffs on these producers before levying the tariffs.
Then there’s the question of costs. Gary Hufbauer and Sean Lowry, a senior fellow and research associate, respectively, at the Peterson Institute for International Economics, calculated [PDF] that Obama’s tariffs on Chinese tires cost American consumers at least $900,000 for every job they saved for one year. That’s before taking account of job losses caused by lower spending by consumers on other products and by retaliatory Chinese tariffs. This very high cost per job, they point out, is consistent with research on other instances of trade protection.
In an interview, Hufbauer notes that our efforts to protect industries from competition have typically not resulted in their revival and impose extremely high costs for any jobs they save. He cites the textile and maritime industries, both of which have been protected for decades, as examples of these disappointing results.
Ramesh Ponnuru, “The High Cost of U.S. Protectionism”, Bloomberg View, 2016-07-01.
March 5, 2018
QotD: Mercantilism
According to the mercantilist dogma held by nearly all politicians and pundits (and, yes, also by the People), the best possible outcome for any country – call it country A – whose government is negotiating a trade deal is the following: the government of A arranges for the maximum possible number of citizens of A to work the maximum possible number of hours producing goods and services of maximum possible value to be exported to the maximum possible number of foreigners whose governments agree to prevent those foreigners from ever sending in return to the people of country A even as much as a single wooden toothpick.
The optimal trade deal for country A – according to mercantilist dogma – is one that commits the people of A to work for foreigners without compensation. This optimal trade deal, in effect, turns the workers of country A into slaves for foreigners. (Such a deal would have country A workers paid, in real goods and services, absolutely nothing – which is a wage well below the minimum wage that many of the mercantilist leaders, in other contexts, support!)
According to mercantilist dogma, were the diplomats and ‘leaders’ of country A able to negotiate such an outcome, those diplomats and ‘leaders’ would be hailed has having secured a huge and unconditional trade victory of the sort that history has never before witnessed. Country A would be renowned worldwide as the greatest “winner” ever in matters of international trade.
According to mercantilist dogma, it is therefore unfortunate for the people of country A that the diplomats and ‘leaders’ of countries B through X are unwilling to grant such splendid terms to A. The diplomats and ‘leaders’ of countries B through X each would also like to secure such an ideal outcome, as described above, for their countries. But the necessity of compromise prevents any country from winning such an unalloyed and stupendous victory. The result of the compromise for all countries is an imperfect trade deal under which each country reluctantly agrees to receive valuable goods and services from foreigners as the price that must be paid for the privilege of sending domestically produced good and services to foreigners.
Don Boudreaux, “The Idiocy of Mercantilism”, Café Hayek, 2016-06-25.
January 28, 2018
QotD: Protectionism
All protectionism is rooted in the mistaken presumption not only that existing, domestic producers have a moral right – enforceable by the state – to the patronage of domestic consumers, but also that no future domestic producers have such a right as against current domestic producers. This right, were it real, implies that consumers exist to please existing domestic producers; it implies that continued or expanded production of that which is currently produced domestically is the end, while consumption is only the means of encouraging such production.
Only the widespread, if unthinking, acceptance of this presumption gives credence to the demands of domestic producers that some “unfair” practice by a foreign rival or foreign government justifies the imposition by the home government of punitive taxes on domestic consumers who purchase imports. Only a widely shared, if seldom articulated, belief that current domestic producers have a right to some minimum portion of domestic-consumers’ incomes explains the nodding of the heads of many people of all political persuasions when they hear some politician or pundit or preacher demonize foreign producers for selling wares to domestic citizens.
Don Boudreaux, “Protectionism”, Cafe Hayek, 2016-05-27.
January 27, 2018
The difference between being “pro-free market” and “pro-business”
It’s a distinction that really does make a difference, argues Jonah Goldberg:
One of the most difficult distinctions for people in general and politicians in particular to grasp is the difference between being pro-free market and pro-business.
There are many reasons for this confusion. For politicians, the key reason is that businesspeople are constituents and donors, while the free market is an abstraction. Also, because capitalists tend to lionize successful people, we assume they share our philosophical commitments. But it is a rare corporate titan who favors a free market if doing so is bad for his or her bottom line.
Adam Smith recognized this in his canonical 1776 work, The Wealth of Nations. “People of the same trade seldom meet together, even for merriment and diversion,” he wrote, without the conversation ending “in a conspiracy against the public, or in some contrivance to raise prices.”
This doesn’t mean that capitalists are evil; it means they’re human beings. Virtually every profession you can think of has a tendency to dig a moat around itself to protect its interests and defend against competition. A few years ago, the American Academy of Pediatrics came out against affordable health care for children. Retail chains like Walmart and CVS started opening in-store clinics to provide affordable basic health care like vaccinations. The pediatricians rightly saw this as a threat to their monopoly over kids’ medical care. Obviously, the pediatricians didn’t think they were villains; they simply found rationalizations for why everyone should keep paying them top dollar for stuff that could be done more cheaply.
Similarly, most teachers like kids, but that doesn’t stop teachers unions from doing everything they can to protect themselves from competition or accountability. Indeed, unions, by design, are conspiracies against the public to defend the wages and perks of their members. NIMBYism (Not in My Backyard) is another manifestation of this phenomenon.
[…]
Smith understood this too. After noting how people of the same trade conspire to raise prices, he added: “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”
What both Smith and the founders understood is that such conspiracies can only last with the help of government. As the economist Joseph Schumpeter argued, in a system of free competition, monopolies cannot long endure without government protection.
December 15, 2017
QotD: Crony capitalism
First, we labor under a ubiquitous threat of being shackled by crony capitalists. [Adam] Smith wondered how internally stable a free market could be in the face of a tendency for its political infrastructure to decay into crony capitalism. (The phrase “crony capitalism” is not Smith’s. I use it to refer to various of Smith’s targets: mercantilists who lobby for tariffs and other trade barriers, monopolists who pay kings for a license to be free from competition altogether, and so on.) Partnerships between big business and big government lead to big subsidies, monopolistic licensing practices, and tariffs. These ways of compromising freedom have been and always will be touted as protecting the middle class, but their true purpose is (and almost always will be) to transfer wealth and power from ordinary citizens to well-connected elites.
David Schmidtz, “Adam Smith on Freedom” (published as Chapter 13 of Ryan Patrick Hanley’s Adam Smith: His Life, Thought, and Legacy, 2016).
November 7, 2017
QotD: Crony capitalism
Fascism is actually an economic system, of which “crony capitalism”, an illegitimate partnership between government and business, is an excellent example. Known otherwise as corporate socialism or simply corporatism, other eras (Adam Smith‘s for instance, in his book Wealth of Nations) have called it Mercantilism.
L. Neil Smith, “The American Zone”, The Libertarian Enterprise, 2016-03-20.
November 2, 2017
QotD: Free trade versus modern “Free Trade” agreements
Once upon a time, free-trade agreements were about just that: free trade. You abolish your tariffs and import restrictions, I’ll abolish mine. Trade increases, countries specialize in what they’re best equipped to do, efficiency increases, price levels drop, everybody wins.
Then environmentalists began honking about exporting pollution and demanded what amounted to imposing First World regulation on Third World countries who – in general – wanted the jobs and the economic stimulus from trade more than they wanted to make environmentalists happy. But the priorities of poor brown people didn’t matter to rich white environmentalists who already had theirs, and the environmentalists had political clout in the First World, so they won. Free-trade agreements started to include “environmental safeguards”.
Next, the labor unions, frightened because foreign workers might compete down domestic wages, began honking about abusive Third World labor conditions about which they didn’t really give a damn. They won, and “free trade” agreements began to include yet more impositions of First World pet causes on Third World countries. The precedent firmed up: free trade agreements were no longer to be about “free” trade, but rather about managing trade in the interests of wealthy First Worlders.
Eric S. Raymond, “TPP and the Law of Unintended Consequences”, Armed and Dangerous, 2016-04-12.
February 17, 2017
Industrial policy example – Kingston, Ontario
David Warren remembers when the government tampered with the free market to “save an industry” in Kingston:
Once upon a time, many years ago, I scrapped into one of these “no-brainer” political deals. The remains of the locomotive manufacturing business in Kingston, Ontario — whose century-old products I had glimpsed, still on the rails in India — were now on the block. A monster German corporation was offering to buy them, for the very purpose of competing, in Canada, with a (hugely subsidized, monopolist) Canadian corporation. The government stepped in, to “save” a Canadian industry, retroactively change the ground rules, and kick in more subsidies so that the Canadian monopolists, based in Montreal, could take over instead. This was accompanied by nationalist rhetoric, and Kingston was thrilled. Critics like me were unofficially deflected with bigoted anti-German blather held over from the last World War.
But I knew exactly what was going to happen. The local works, which would have been expanded by the foreign owner, were soon closed by the new Canadian owner, after studies had been commissioned to “prove” it was uneconomic. The latter’s last possible domestic competitor was thus snuffed out. The locals, whose lives had been for generations part of a proud Kingston enterprise, had been suckered. The politicians had told them it was little Canada versus big Germany. In reality, it was pretty little Kingston versus big ugly Montreal.
That is how the world works, with politics, so that whenever I hear of a big new national no-brainer scheme, my first thought is, which innocents are getting mooshed today?
February 16, 2017
Words & Numbers: The Customer is Always Taxed
Published on 15 Feb 2017
We’re really excited to present the first episode of what will be an on-going video podcast featuring Dr. Antony Davies, Professor of Economics of Duquesne University in Pittsburgh, and Dr. James R. Harrigan, Senior Research Fellow at Strata, in Logan, Utah.
Each Wednesday we’ll be sharing a new short video featuring Antony and James talking about the economics and political science of current events. We hope you enjoy the show and look forward to your input on what topics Antony and James should cover in the future.
Today’s episode is about everybody’s favorite subject: Taxes!
