Wednesday, March 7, 2018

Trump's Protectionist Commerce Secretary Can't Even Get Basic Math Right

A Don Boudreaux letter to the Wall Street Journal:
You highlight some of the many flaws in Commerce secretary Wilbur Ross’s case for punitive taxes on Americans who buy steel, aluminum, and products made with these metals (“Professor Ross’s Soup-Can Economics,” March 6).  But apparently you’re too kind to point out publicly that Mr. Ross is poor even at basic arithmetic.
Here’s the Ross quotation that you ran: “’Let’s put it in perspective.   I just bought a can of Campbell’s soup today at the 7-Eleven.  It was $1.99 for the can.  There’s about 10 cents worth of tin plate steel in this can.  So if it goes up 25%, that’s a tiny fraction of one penny.  That’s not a noticeable thing.’”  But in fact, 25 percent of 10 cents is not “a tiny fraction of one penny”; it’s not even a big fraction of one penny.  It’s 2.5 pennies.
Mr. Ross’s inability to master third-grade arithmetic isn’t his only, or worst, failure. While even a 2.5 cent increase in the price of each can of soup might indeed not be “noticeable,” Americans don’t buy one can of soup annually.  From Campbell’s alone, the number of cans of soup that Americans buy each year is more than 440 million.  So even if, contrary to fact, cans of Campbell’s soup are the only product made with metal to rise in price because of Trump’s tariffs – that is, even the prices of cans of other brands of soup, and those of cans of soda, of vegetables, and of meats – don’t rise at all, a 25 percent increase in the price of the metal in each can of Campbell’s soup will (assuming Campbell’s sales aren’t negatively affected) cause Americans annually to spend $11 million more on Campbell’s soup.  This additional $11 million spent on Campbell’s soup will necessarily cause Americans to spend $11 million less elsewhere.  Revenues and jobs elsewhere will fall.  And of course if we include, as we should, the higher prices of metal products in addition to Campbell’s soup cans, the spending diversion will be much larger.
In reality, a 25 percent hike in the price of metals won’t cause the price of products made with metals to rise by the full 25 percent.  But prices willrise.  As a result, consumers will in reality buy fewer of these products and, in many cases, pay in total more for them – meaning, in these cases, that spending will fall elsewhere.
It is deeply disturbing that the Commerce secretary not only doesn’t understand arithmetic, but that he also commits the sophomoric fallacy of composition – namely here, inferring that what is true for one can of soup is therefore true for the entire economy of which that one can is but a minuscule part.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

The above originally appeared at Cafe Hayek.


  1. Vox Day is not a fan of free trade and has some cohesive arguments regarding why. He is beyond the usual boilerplate libertardian views.

    1. Re: He-Who-Fantasizes-About-White-European-Males,

      --- Vox Day is not a fan of free trade ---

      Ah, yes. He's a moron. It's like that person who's no fan of money, or health.

      --- has some cohesive arguments regarding why. ---

      And you're a moron for thinking that a series of platitudes and a defense of tariffs based on the practicality of levying tariffs compared to other taxes represent "cohesive arguments" against Free Trade.

    2. The argument he presents in that link is ridiculous. He claims that, because Bob Murphy says that tariffs are less harmful than the income tax, that therefore tariffs are good. That’s a whopper of a non-sequitur

    3. Given this reaction from you two half wits, I know Vox is on the right track. Thanks for confirming my biases.

    4. Protectionists contribute nothing to society.

  2. So Wilbur... If it’s really such a tiny, insignificant amount, then why is it so critical for the state to confiscate it?

    Can’t have it both ways.

  3. This also ignores the "players at the margin". Campbell's Soup may be able to absorb or pass the extra cost to its customers. Bob's Soup Company may not be able to. When Bob's Soup Company shuts down, that is one less competitor in the soup market. Less competition means higher prices and/or lower quality of soup.

    The Protectionists I've been reading claim that Free Trade is "Marxist", but it is they who want the government to intervene to assure one group has a higher standard of living by sponging off everyone else.