Applied to Protectionism
On his CafeHayek blog today, Don Boudreaux gave a great quote from a book by William Graham Sumner. The book is titled Protectionism: The ‘Ism Which Teaches that Waste Makes Wealth. You can access that book for free on Liberty Fund’s site here.
Here’s the quote:
If, now, it was possible to devise a scheme of legislation which should, according to protectionist ideas, be just the right jacket of taxation to fit this country to-day, how long would it fit? Not a week. Here are 55 millions of people on 3½ million square miles of land. Every day new lines of communication are opened, new discoveries made, new inventions produced, new processes applied, and the consequence is that the industrial system is in constant flux and change. How, if a correct system of protective taxes was a practicable thing at any given moment, could Congress keep up with the changes and readaptations which would be required. The notion is preposterous, and it is a monstrous thing.
That insight reminded me of a section of Robert Nozick’s Anarchy, State, and Utopia titled “How Liberty Upsets Patterns.” Nozick points out that if the distributionists get their way so that everyone has the ideal amount he or she should have (ideal based on their standards), this won’t last long. Some people will start spending money on seeing, say, Wilt Chamberlain, playing basketball. Actually, many people will do this. As a result, Wilt Chamberlain will get rich and he won’t have the initial distribution he was allowed: he will have more. And some of the people paying to see him play basketball will have less than the initial ideal distribution.
In short, liberty upsets patterns.
Similarly, let’s say Trump gets his way, whatever that is, and we get the ideal trade balance with each country. (That’s a huge assumption, because Trump seems to want a zero trade balance with each country, which would necessarily lead to a reduction in foreign investment in the United States or an increase in U.S. investment in other countries. But let’s assume it.)
Now someone in the United States decides he wants to buy more clothing from Vietnam. He wears it and other people notice it and want to buy more. Within a few months, the trade balance with Vietnam goes negative. We are buying more from them than they are buying from us.
That’s not a problem. But to life arrangers like Donald Trump, it is a problem.
Liberty upsets patterns, including trade balances.
READER COMMENTS
Jon Murphy
Apr 10 2025 at 7:57am
In my paper Cascading Expert Failure, I discuss this process some (although not in the same terms you do here). I point out how an expert plan can go wrong, but the expert may not know why his plan went wrong. So, he reacts to that by trying to force some other way to achieve the goal. But, the same predictable problems occur, and the expert continues to adjust and adjust. Under certain conditions, these small errors end up cascading into monumental failures.
David Henderson
Apr 10 2025 at 9:21am
Definitely in the same spirit as this analysis.
David Seltzer
Apr 10 2025 at 11:53am
Jon wrote “But, the same predictable problems occur, and the expert continues to adjust and adjust. Under certain conditions, these small errors end up cascading into monumental failures.” I suspect the expert’s adjustments are made using incomplete information. In complex dynamical systems errors propagate exponentially and amplify intertemporally. Also known as The Butterfly Effect. A metaphor for chaos theory. To wit. Sensitive dependence on initial conditions means a small change in one state of a deterministic nonlinear system can result in large differences in a later state. It seems DJT’s tariff fetish is the initial condition that’s caused this monumental trade war failure.
Andrew_FL
Apr 10 2025 at 9:51am
This is true but I don’t think it will persuade anyone. The implication is simply that if distributionists want to maintain a given distribution, if protectionists want to maintain a given trade balance, they must not only intervene but keep intervening, forever. Unfortunately I’ve yet to meet the member of either group who isn’t all too eager to keep intervening forever.
David Henderson
Apr 11 2025 at 6:15pm
You wrote:
It’s hard to believe that a true argument wouldn’t convince anyone. In fact, I have an instant counterexample: it convinced me. I had literally never thought of that argument before. I remember when the book came out and a lot of us found that particular idea one of the best ideas in a book full of good ideas.
I think in your last sentence you get to what you really mean by “anyone:” people in a particular subset. Even here, though, I would bet a small percentage would be convinced.