The basic economy of rates and protectionism

Imposing High rates by President Donald Trump yesterday suggests an overview of the basic economy of this type of government intervention. A rate (or tax) imposed by the government of the Land D (‘domestic’) on a good G imported from Land F (‘foreign’) has three major effects.

Firstly, the rate increases the price of G in Land D, including the prices of the GS produced in its own country: there cannot be two different prizes for the same good in a free market. Secondly, the higher price of G in the country D reduces the requested amount, but in the usual simple model (and the graphic representation at university level) increases the ratio that is supplied by domestic producers. Thirdly, consumers (or buyers of business input and their own customers, until the final consumers) are held in D in their desired transactions. Details and qualifications do not change the core of these conclusions. To consider:

(1) As economists know, it is not impossible that the price of G in D rises less than the rate. If the residents of D consume a large part of the GS that are produced in F, the reduction of the requested quantity can push the price of the input – the producers in F “Eating” part of the rates. What happens is that producers in F lose such an important part of their market that consumers can lower the price of G in D. This special case, which is the possibility of an “optimum rate” higher than zero, will not be frequent and will rarely cancel the entire price increase in D., indeed, indeed, Multiple economic studies have shown that American consumers have paid the most rates, if not all, imposed by Trump during his first mandate.

It can still be the producers of some Goods imported into the United States (D) from Mexico or Canada (F) will absorb part of the rate, but this will generally not be the case. That Donald Trump said he saves oil products from the Highest rates announced yesterday Would suggest that he himself, intuitively and confused, is somehow aware that rates are generally paid by the consumers of the country whose government imposes them.

(2) assumed that, as economists do, that some people in D prefer the GS that are produced in their own country above that produced in F at the same price, quality and brand reputation (“national preference”), will reduce the reduction of The quantity required in D. The GS produced in F. This explains why producers (shareholders and employees) of G in Land F will also suffer from the rates, and why they will lobby their government to take revenge on some other goods produced in D. of D have no (individual) “national preference” or they cannot distinguish between petrol produced from oil and that produced by good Americans), the rate can be less new Bring production into d and less reduction in import than usual.

(3) From the perspective of human well -being, the third consequence – the reduction in trade among willing traders – is the most important thing, even if it is not immediately visible. Trade is the essence of economic (and social) life. Individuals specialize in what they do best (or the least bad) and sell their products for lower prices than can quote less efficient producers. Buyers and ultimate consumers therefore get more for less: they sell their labor services to productive and competing companies at home and buy their goods from the most productive, whether in the same city, the same state or province, or in the national edges. A rate interferes with this process.

Competition and trade create disturbances, but there is no other way to maximize general prosperity. Disruptions and orders by political authorities give no guarantee of that as human history can be seen tragically. The alternative between trade and war lies with the limit.

Trade delay only makes it worse. It is irrational from the point of view of general well -being: when you (the domestic ruler) touch your consumers in the face, I take revenge (the foreign ruler) by also touching my consumers.

For everyone without cognitive disabilities, I believe, the basic trade economy is not very difficult to understand, even if an effort is needed. But there is something more difficult to learn, on the border of economy and moral political philosophy. I fear that this will be unknowable for Trump and all those who do not make a clear distinction between collective and political choices on the one hand, and individual and private choices on the other. Competition and disruption (either through trade, technological progress, change in consumer preferences, etc.) can, at least temporarily and locally, approach some people. But from the perspective of general prosperity and human flowering, it is better that each individual is limited by the configuration as a result of the equal freedom of all individuals than to be the boss by the compelling actions of a political ruler, or a person or A collective.

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