What If Fama Was a Protectionist?
By Bryan Caplan
Here’s a Fama-flavored argument for protectionism.
GDP = Consumption + Investment + Government Spending + Net Exports
Net Exports = Exports – Imports
The larger Imports are, the smaller Net Exports are, and the smaller GDP gets.
Therefore, Imports reduce GDP, and keeping out foreign products will raise GDP.
OK, now find the flaw.
Update: The answer is that when Imports go up by $X, Consumption (or possibly Investment or Government Spending) automatically and by definition also rise by $X. Congrats to everyone who got this right. The rest of you are thinking too hard – this is accounting, not philosophy!