Confusions About Collectives

Humans work in groups all the time.  Indeed, I argue we are stronger because of it.  Specialization and trade allows for a team to achieve things no individual could accomplish on their own.  Economists since Adam Smith have highlighted the group efforts needed to produce even simple things such as wool coats, pencils, and bread.  Indeed, liberals have long celebrated the ability for people to cooperate without explicit coordination!

However, these collectives sometimes get blended together.  What is good for one group is often asserted to be good for another.  Or that there is some overarching group, and all other groups are subsumed into that group.  Again, what is good for that overarching group is asserted to be good for all its parts.  We see this particularly in international trade, and with protectionism in particular.  Protectionism is rife with this fallacy of composition- in particular, the national defense justification for tariffs.  

I have written a lot on the national defense justification for tariff. This 2018 piece from me here at Econlog remains one of my favorites.  I am working on a book with Don Boudreaux on international trade where we expand upon national defense justifications.  The essential idea is there is some good necessary for national defense, procuring it from a foreign source has a high risk of disruption, and therefore tariffs are required to attempt to develop the industry domestically.

Theory often departs from reality, however, and there is mounting evidence that national defense tariffs actually weaken national defense capabilities (for example, see Colin Grabow and Inu Manak’s The Case Against the Jones Act or Mancur Olson’s The Economics of the Wartime Shortage).  

But the argument for tariffs on military goods, at least how it is currently deployed, rests on a confusion about collectives.  Let us suppose that national defense tariffs are:

  1. Necessary, 
  2. Easily targeted
  3. Not prone to rent-seeking, political manipulation, or other forms of corruption


In short, let us assume national defense tariffs work perfectly as intended.  It does not logically follow, however, that those national defense tariffs would be the best, or even a good, way to achieve their intended goals.  Tariffs, recall, apply to all users of a particular input, not just one.  Firms that use, say, microchips for their products must also pay higher prices for their inputs.  

Justification for national defense tariffs is presented as “we” want a domestic source of the good.  But that is not the case.  The government wants it.  But most of us do not.  Why force others to pay a higher price when only one group needs it?  The government can buy from domestic suppliers.  There is no need to force everyone else to as well.

In other words, we need to think of “The United States of America” not as a single collective entity represented entirely by the wishes and desires of the Federal Government, but rather as a collection of various groups, each with their own individual wishes and desires, and their own agency.  The Federal Government is not the representative of Americans.  It is a unique corporation with a specific purpose.  It may conduct its business as it sees fit.  But what is desirable for the government is not necessarily desirable for the people living under the government (and vice versa).  

Collectivist ideologies have many problems.  One of the biggest is they ignore the complexities of society by subsuming everything under a broad umbrella and is coterminous with the government.  This, in turn, leads to many disastrous policy mistakes, such as protectionism.  

 


Jon Murphy is an assistant professor of economics at Nicholls State University.

READER COMMENTS

steve
Jan 14 2025 at 12:29pm

I think Boudreaux has done some really good work, writes well, on international trade. I hope you will expand and provide numbers to support the idea that international trade is still good when it’s unequal because one party is subsidizing production. Also hope you address some negatives like what really happens to the 60 year old foreman at the widget factory when the widget factory moves overseas.

Steve

Jon Murphy
Jan 14 2025 at 1:12pm

There’s a whole chapter dedicated to those points.  And I’ll give you a free preview now:

What happens to the foreman because of offshoring is the same thing that happens to him/her because of any other change in economic conditions: consolidation, change in consumer preferences, etc.  There’s nothing unique about international trade.

Thomas L Hutcheson
Jan 15 2025 at 11:14am

I agree, but for presentation, things to think about:

Economists think first of inefficiency, the DWL but the public thinks entirely of income transfers.

Economists think policy is about going from no restriction to restriction.  The public thinks  policy is about going from restriction to less restriction.

The fact that there is (seems to be) a policy that can “protect” the widget foreman from trade but not from changed preferences.  Plus the perception that the closure of the factory was caused by a policy of freeing trade (lower tariff/allowing China into the WTO).  This gives a different feel to the argument.  For this reason it’s important to highlight that most of the effects of changes in trade are NOT (our) trade policy.  Shipping costs fell.  The cost of international telecommunications fell.  Other countries stopped suppressing their exporters.

It is not appreciated that protection is about income transfers among domestic consumers and producers; it’s not mainly foreign/domestic.   And it not only a transfer from consumers of x to producers of x.  Because of the exchange rate effect exporters suffer and consumers of non-tariffed goods benefit.[Of course since trade is mutually beneficial foreigners do also suffer from domestic “protection”]

And highlight the import-subsidizing, exports taxing effects of fiscal deficits that pull in foreign capital and “strengthen” the dollar.

We would not worry so much about that widget foreman in a faster growing, more dynamic economy.  Fix NIMBYism, reduce the amount of regulation that doesn’t have a NPV > 0, reduce deficits, promote more merit based immigration, Pigou tax negative externalities, tax consumption not income.

Jon Murphy
Jan 15 2025 at 4:37pm

Thomas-

I see your point, but I do not think it’s entirely relevant insofar that it is the conversation people are having.  The foreman will object if s/he loses their job due to trade, a change in preferences, a change in technology, whatever.  The objection is the loss of the job not the reason why.  For example, the Longshoreman struck not because they feared to lose their job to trade but because of automation.  Same with a lot of worker strikes in other areas. There is nothing unique about international trade.

Thomas L Hutcheson
Jan 14 2025 at 9:00pm

I hope your argument also includes consideration of national defense tariffs only on risky/hostile suppliers.  Security of supply is greater if the “strategic” good can come from both domestic and non-hostile foreign suppliers, not just domestic suppliers.  Also if the strategic good is … er .. good, then maybe the correct policy woud be a production subsidy and import subsidy so as not to discourage use of the strategically good thing.  (I think Smith discusses bounties and was skeptical on the same ground that one would be skeptical about tariffs.  He did allow for tariffs or bounties for strategic or war-needed goods.)

Jon Murphy
Jan 15 2025 at 4:34pm

I hope your argument also includes consideration of national defense tariffs only on risky/hostile suppliers.

That’s a good point, but we don;t cover it explicitly.  The section is more about the evidence on the effectiveness of the national defense justifcation for ensuring reliable sources.

Richard W. Fulmer
Jan 15 2025 at 4:36pm

Even “the government” isn’t a single entity with easily definable goals and needs. Like society in general, it consists of separate, and sometimes competing, institutions and individuals.

Comments are closed.

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