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Once Again, Economies Do Not Grow By Making Goods and Services Less Abundant

Sunday, November 13, 2016 10:02
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(Don Boudreaux)


Here’s a letter to a correspondent who describes himself as “an elated Trump voter”:

Mr. Carroll Shiffrin

Mr. Shiffrin:

Thanks for your e-mail.  You allege that Henry George – whom I favorably quote – was “shortsighted” to insist that tariffs reduce the quantities of goods and services available for domestic consumption.  Your allegation rests on your belief that “cutting imports stimulates domestic production, growing the cake at home….  Our workers’ wages soon buy more and their living standards grow.”

Not so.  Because resources at home are scarce, producing more goods at home to replace imports requires producing fewer of other goods at home.  If, however, you’re correct that forcibly reducing ordinary people’s consumption options expands these options, then the use of this miraculous policy tool ought not be confined to limiting people’s access to imports.  Why not have the state further enrich the masses by also limiting their access to goods and services produced domestically?

Were Uncle Sam to demolish one in every ten new automobiles produced by G.M., Ford, and Chrysler, and to destroy one in every five hamburgers prepared by McDonald’s, Wendy’s, and Burger King, he would immediately reduce American consumers’ access to automobiles and hamburgers.  But according to your economics, this demolition and destruction would soon increase our production and consumption of automobiles and hamburgers without reducing our production and consumption of other goods and services.  Given this wondrous reality, it’s surely “shortsighted” for Uncle Sam to artificially increase the scarcity only of imports.  If the goal is to maximize our prosperity – and if you are correct that prosperity springs from artificially created scarcities – then Uncle Sam should artificially increase the scarcity of all goods and services, whether produced abroad or at home.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030


Of course, one risk in writing a letter such as the one above is that many people will not see the absurdity in the reductio.


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