One of my haunts is a local tobacco shop, where I regularly drop in to smoke a few bowls of fine pipe tobacco and talk to a fine group of friends and acquaintances. I go there to relax, which is what pipe smoking is all about, but part of yesterday’s visit was anything but relaxing.
I happened to bring up Trump’s new tariffs on washing-machine and solar-panel imports, pointing out, of course, that the tariffs are a tax on American consumers and a slap at all Americans who don’t make their living in the washing-machine and solar-panel industries. In other words, the special interests triumphed over individual and general welfare.
To my (naive) surprise, the small group of people sitting around what we affectionately call “the table of knowledge” couldn’t believe what I was saying. They favored the tariffs because they believed Trump’s action would help all Americans and punish the Chinese. That’s all they “knew” or needed to know.
When I tried to explain that their belief was mistaken, they would not hear it. It had apparently never occurred to them that the action would harm consumers and Americans who make things other than the targeted goods, that is, the vast majority of people in the country. (Some America First policy, right?) Indeed, they said we can avoid the tariff by buying American products! They said this even while acknowledging that the price of domestic products would rise because of the tariff, which is the point.
It also never occurred to them that we live in a world of scarcity. If Americans and resources are employed to make washing machines and solar panels, they can’t be employed to make other things. (That’s physics as well as economics.) So my friends did not see that if we buy washing machines and solar panels from somewhere other than America, we can have them plus the other things Americans would produce. But if the government raises the prices of the imports to keep domestic firms going — which is the point of tariffs — we won’t get those other things.
In other words, along with scarcity, my tobacco brotherhood had no appreciation of the division of labor.
They also did not see that if we have to spend more money on washing machines and solar panels, we’ll have less money to spend on other goods and services, harming us both as consumers and as producers of those other goods and services. Nor did they grasp that tariffs reduce the number of dollars foreigners have with which to buy American exports or that an ensuing trade war would also harm American exporters.
To use Paul Heyne’s expression, my friends were strangers to the economic way of thinking. Specifically, the habit of looking for the unobvious secondary effects of government policy — Bastiat’s “what is not seen” — was missing from their repertoire. They are hardly unusual in that respect. Most people have had no contact with the economic way of thinking when it comes to government policy, although they engage in it whenever they shop.
Think of what this means for the theory of representative democracy? Much of what the government does is interfere with our economic pursuits. Therefore, most of what “our” so-called representatives — I call them misrepresentatives — do is enact legislation consciously designed for such interference. That means candidates for office ought to be judged on what they know about basic economics and the consequences of interference. How can we expect people to be competent participants — informed voters — in this system if they don’t understand the most basic economic principles?
Needless to say, the matter of individual liberty made no difference in the discussion. All they saw was Trump helping “Americans” and slamming foreigners.
