Some More Thoughts on Protectionism

Commenting on this post, Rob makes the case the protectionism is a legitimate policy if it is done on grounds of morality. In other words, if Nation A decides to enact a protectionist policy against Nation B, it is legitimate only if its motivation is because of certain policies (say labor or environmentally related) that Nation A calls into question.

Let's remember that protectionist policies are government mandated policies, most notably enacted as price controls in the form of tariffs and subsidies. So protectionist policies are determined by government officials, not markets.

Rob claims he doesn't have faith in markets to make such decisions, but seems to believe government actors do. He concludes his comment by stating, "it is simply the right of a nation to decide what crosses their borders," which I interpret as meaning government officials possess the right to determine what crosses the nation's borders, and thus enter the marketplace.

Here are my issues with this view:

1. How is it determined what economic practices and policies are moral or not? For example, are sweat shops with "low" wages and "unsafe" working conditions "immoral"? Why? What role does bias, perception and relativism have to play in this determination?

2. Who is making these moral decisions? Why should they be trusted? What are the checks on their decision-making?

3. How far can we extend this moral governance? To domestic issues? To the state and local level? Where is the line drawn? Why there?

4. If markets are not to be trusted, why not?

5. Public Choice Theory would argue that political actors are more subject to the irrational emotions market actors are normally subjected to (greed and fear) because they have less "skin in the game." How are we to trust that they [political actors] are immune to these forces in these instances?

6. Trade has been one of the greatest catalysts of economic dynamism and productivity. What does limiting it, even on moral grounds, ultimately achieve, especially for those whom are being protected against and are thus at the greatest disadvantage?

7. Costs go far beyond regulatory costs. There are real price costs, opportunity costs, political costs, etc... How are these to be measured? What is the cost/benefit? For example, much of the reason the American-Cuban Trade Embargo is still in place is due to "moral" reasons (the fact that these so called moral motivations are so murky to begin with supports my first question). Now would anyone seriously argue, from an economic perspective, that the benefits of this policy have outweighed the costs?

8. Going back to relativity, what degree does the demand for safety, environmental protections, etc... have to play? If these are immutable laws, as supply and demand in whatever form often are, what is the point of attempting to legislate them away? What are the unintended consequences of doing so?

9. Finally, you [Rob] used Rawls' "Veil of Ignorance" thought experiment to claim that, "I can imagine situations in which I would design a world such that protectionism were allowed despite not knowing what country I would be born in." I think I may see your point, as the costs of racism, from our perspective, are far more visible than the costs of protectionism, especially on an anecdotal level. But that seems like a straw man to me. The negative effects still exist (and probably to a much greater degree) even if they don't grab the same headlines. In that sense, I think the Rawlsian line of reasoning shifts the emphasis of the argument in a different direction and thus doesn't have much relevance to this discussion.

Wise, Sobering Words

As the new health care legislation passes through Congress, I felt it was appropriate to link to William Graham Sumner's 1916 essay, The Forgotten Man. Here is the concluding paragraph, though I strongly urge all to read it entirely in its unfettered brilliance:

The fallacy of all prohibitory, sumptuary, and moral legislation is the same. A and B determine to be teetotalers, which is often a wise determination, and sometimes a necessary one. If A and B are moved by considerations which seem to them good, that is enough. But A and B put their heads together to get a law passed which shall force C to be a teetotaler for the sake of D, who is in danger of drinking too much. There is no pressure on A and B. They are having their own way, and they like it. There is rarely any pressure on D. He does not like it, and evades it. The pressure all comes on C. The question then arises, Who is C? He is the man who wants alcoholic liquors for any honest purpose whatsoever, who would use his liberty without abusing it, who would occasion no public question, and trouble nobody at all. He is the Forgotten Man again, and as soon as he is drawn from his obscurity we see that he is just what each one of us ought to be.