Bad Use of ‘Public Good’

(Don Boudreaux)

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Here’s a follow-up letter to Mark Wilson:

Mr. Wilson:

Thanks for your follow-up e-mail. Alas, I strongly disagree that “government provides a public good by utilizing tariffs to expand the market for US-made goods.”

You’re correct that the opening of foreign markets can enable some American producers to produce on larger scales. You’re correct also that the resulting greater profits would be a benefit to these American producers. Yet it doesn’t follow that government should intervene in order to enable firms to take advantage of larger economies of scale.

Before leaping to the conclusion that I’m mistaken, ponder this question: Should our government outlaw the sale of used cars? After all, people who buy used cars don’t buy new cars. The availability of used cars thus keeps the market for new American-made cars smaller than otherwise and, as a result, causes production runs at GM, Ford, and Chrysler to be smaller than otherwise. The availability of used cars therefore denies to American automakers the greater profits they might earn by producing at even larger economies of scale.

Do you believe that our government fails to provide a “public good” by not “utilizing” its power to “expand the market” for U.S.-made automobiles by outlawing the sale of used cars?

I understand that a thriving used-car market differs economically and ethically from the interventions of foreign governments that obstruct their citizens’ freedom of commerce. But I submit not only that the principal victims of those foreign interventions are not Americans, but foreigners – and not only that unilaterally imposed tariffs have a poor track record of expanding global markets for U.S.-made goods – and not only that it’s unethical for our government to help some of us expand our access to buyers by harming others of us by shrinking our access to sellers – but also that your use here of the concept of a “public good” is evidence that this concept has in practice become little more than camouflage for government mischief.

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