Diogenes
Nemo me impune lacessit
Let's take a look, shall we?
Their first mistake is to consider only the costs of tariffs, and not the benefits. Traditionally, an economist assessing a proposed market intervention begins by searching for a market failure, typically an “externality,” in need of correction. Pollution is the quintessential illustration. A factory owner will not consider the widespread harms of dumping pollutants in a river when deciding how much to spend on pollution controls. A policy that forces him to pay for polluting will correct this market failure—colloquially by “making it his problem.” It imposes a cost on the polluter in the pursuit of benefits for everyone else.
Tariffs address a different externality. The basic premise is that domestic production has value beyond what market prices reflect. A corporation deciding whether to close a factory in Ohio and relocate manufacturing to China, or a consumer deciding whether to stop buying a made-in-America brand in favor of cheaper imports, will probably not consider the broader importance of making things in America. To the individual actor, the logical choice is to do whatever saves the most money. But those individual decisions add up to collective economic, political, and societal harms. To the extent that tariffs combat those harms, they accordingly bring collective benefits.
Some opponents of tariffs ignore those benefits because they don’t believe that manufacturing things domestically matters. For example, Adam Posen, the president of the Peterson Institute for International Economics, has called Trump’s proposal “lunacy” and “horrifying.” But he has also dismissed concern for American manufacturing as “the general fetish for keeping white males of low education outside the cities in the powerful positions they’re in.” Similarly, Michael Strain, the head economist at the American Enterprise Institute, believes that tariffs “would be a disaster for the U.S. economy.” In his view, the United States cannot be a manufacturing center again, “and we should not want to be.”
These arguments may be internally coherent, but they are wrong
www.theatlantic.com
Oh, dear.
Trump’s Most Misunderstood Policy Proposal
Economists aren’t telling the whole truth about tariffs.Their first mistake is to consider only the costs of tariffs, and not the benefits. Traditionally, an economist assessing a proposed market intervention begins by searching for a market failure, typically an “externality,” in need of correction. Pollution is the quintessential illustration. A factory owner will not consider the widespread harms of dumping pollutants in a river when deciding how much to spend on pollution controls. A policy that forces him to pay for polluting will correct this market failure—colloquially by “making it his problem.” It imposes a cost on the polluter in the pursuit of benefits for everyone else.
Tariffs address a different externality. The basic premise is that domestic production has value beyond what market prices reflect. A corporation deciding whether to close a factory in Ohio and relocate manufacturing to China, or a consumer deciding whether to stop buying a made-in-America brand in favor of cheaper imports, will probably not consider the broader importance of making things in America. To the individual actor, the logical choice is to do whatever saves the most money. But those individual decisions add up to collective economic, political, and societal harms. To the extent that tariffs combat those harms, they accordingly bring collective benefits.
Some opponents of tariffs ignore those benefits because they don’t believe that manufacturing things domestically matters. For example, Adam Posen, the president of the Peterson Institute for International Economics, has called Trump’s proposal “lunacy” and “horrifying.” But he has also dismissed concern for American manufacturing as “the general fetish for keeping white males of low education outside the cities in the powerful positions they’re in.” Similarly, Michael Strain, the head economist at the American Enterprise Institute, believes that tariffs “would be a disaster for the U.S. economy.” In his view, the United States cannot be a manufacturing center again, “and we should not want to be.”
These arguments may be internally coherent, but they are wrong
Trump’s Most Misunderstood Policy Proposal
Economists aren’t telling the whole truth about tariffs.
www.theatlantic.com
Oh, dear.
