Thursday, February 7, 2013

The Anti-Economists Among Us

Gary North takes a smack at their view on tariffs:

Certain economic ideas that are both logically wrong and unsupported by historical facts, and which have been known to be wrong for 250 years, are still widely held. This annoys economists.

There is something that seems inherent in men's approach to thinking about their own wealth that persuades them that what they have seen, over and over, in nation after nation, either did not happen, or, if it clearly did happen, will not continue.

One of these ideas is that sales taxes on imported goods increase the wealth of most people in society. This is the doctrine that tariffs and quotas imposed by the government somehow make people richer. This error was refuted definitively by one of the greatest philosophers of all time, David Hume, in 1752. About 25 years later, it was refuted in detail by Adam Smith, David Hume's friend, in his classic book, The Wealth of Nations. Nevertheless, despite almost universal agreement among economists, and despite repeated political successes in lowering tariffs and quotas, which have led to increasing prosperity everywhere, there is still a hard core of anti-economics thinking that says that the federal government – but never state and local governments – needs to increase sales taxes on imported goods, or else we will all be made poor.

I have written many times about this over the last 45 years, and I intend to write a lot more, but I have no illusion that the anti-economists among us will never figure out that national sales taxes on imports do not make us richer. Some people simply do not have the intellectual capability of following a line of economic reasoning. This includes people who believe that sales taxes on imported goods make most people wealthier.

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