The A Priori Case Against Tariffs

By Gabriel Deen
            Economics, as a science, is not primary. It is a subset of praxeology - the study of human action. More specifically, praxeology is the study of purposeful action. As Murray Rothbard, perhaps the greatest Austrian economist since Ludwig von Mises, puts it, “Praxeology rests on the fundamental axiom that individual human beings act, that is, on the primordial fact that individuals engage in conscious actions toward chosen goals.“ Keep this in mind when considering the issue of tariffs (taxes on imports).
            Tariffs fundamentally disrupt the natural workings of the economy by imposing degrees of coercion. Normally, in markets, prices are determined strictly by the wants of the consumers - they will only trade when the goods they buy are worth more than both anything else they could get for their money at that time, and future potential purchases. If the utility of buying the goods does not outweigh these two alternatives, the consumer will either buy something else or save their money. To determine the market's preferences, one must look at what prices consumers are willing to accept, and, likewise, what prices businesses offer, as well as the demand for certain types of products.
            A consumer will always accept a deal to buy a good that comes at a lower cost and has faster fulfilment (the latter due to “time preference” - the less time needed to get the full utility from a good, the better), all other things being equal. At a certain price, they will refuse the good (or, in the case of necessities such as food and water, be physically incapable of paying). Therefore, businesses have an incentive to improve in these areas and undercut all competition, starting the race with the highest price possible and ending at the most viable price for both the businesses and consumers, since, when a business offers a product at price x, price x becomes the de facto price ceiling for the product (ceteris paribus).
            These facts, taken together, are the basis for looking at prices as signalling mechanisms. Consumer actions reflect what people want - the most important information for producers - and businesses are able to react and adjust to this information accordingly.
            The problem with tariffs is that they are wholly market-external factors. There are no market forces that produce them, and, therefore, they are not the result of any interaction between producers and consumers. The obvious issue is that, if observing trade in a free market is the best way to determine the proper pricing of goods, then imposing fees and costs on businesses trying to sell at that price level disincentivises such selling. This has the effect of essentially destroying the ability of foreign businesses to compete, as they must incur costs just for participating in the market.
            This is not a bad thing for the person who claims that only American businesses should be supported. It does entail that they be free from competition. However, this also means both that, A), there is less reason for American businesses to improve, due to the elimination of foreign threats which could steal their consumers, and, B), the ability for consumers to choose is restricted, as the pool of options is reduced.
            The second of these is perhaps the biggest harm. Consider the meaning of having to impose tariffs for American businesses to compete. For this to be an issue at all, consumers must have a reason to buy from foreign countries - if not, foreign businesses would not be a threat in the first place. What is hidden is that tariffs serve to deny the choices of consumers to dissuade businesses from offering that which consumers desire just because they are not American.
            The only reason to use such protectionist policies is to prop up businesses which would otherwise fail precisely because the market - the people - would let them fail. Anyone in favor of “American interests” cannot also be against American consumers without prevaricating.

The proper course of action when people do not want something is not to degrade the alternatives; charity has no place where freedom is compromised. 

MaxVariety Staff

MaxVariety's Staff is comrpsied of college journalists who, despite being like minded, cover a wide array of topics.

No comments:

Post a Comment