Abstract
The case for the tariff, as it is argued at the present day, is usually based on one of three types of argument — simple fallacies of composition, misconceptions of old theories, new (or apparently new) analysis. At this period of the twentieth century there is no need to discuss the first of these classes. The usual argument for safeguarding — Protection is good for this particular industry; Protection is therefore good for industry as a whole — is a good example of this type and, although it would be a relief if one could be sure that its manifest illogicality were apparent to .001 per cent, of the electorate, it is clearly not a subject of interest to professional economists. But the second and third types of argument have greater speculative attractions and it is the object of these notes to take a few typical specimens, and submit them to further analysis.
A paper read before the London Economic Club, Tuesday, November 11th, 1930.
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Notes
See Frank H. Knight, “A suggestion for simplifying the statement of the general theory of price,” Journal of Political Economy, vol. 36 (June 1928), pp. 353–70
Gottfried Haberler, “Die Theorie der komparativen Kosten und ihre Auswertung für die Begriindung des Freihandels,” Weltwirtschaftliches Archiv, vol. 32 (1930), pp. 349–70.
For an alternative statement of the same fundamental principle, see Bertil Ohlin, “Die Beziehung zwischen internationalem Handel und internationaler Bewegungen von Kapital und Arbeit,” Zeitschrift für Nationalökonomie, vol. 2 (1931), pp. 161–99.
On attempts to deal with dumping by means of a tariff see the article by Professor [Arnold] Plant, “The anti-dumping regulations of the South African tariff,” Economica, Vol. 11 (February 1931), pp. 63–101.
It is worth observing that Mill, who perhaps was more responsible than any for giving respectability to this argument, himself protested bitterly against the uses to which it had been put both in Australia and America. See The Letters of John Stuart Mill, ed. H.S.R. Elliott (London, 1910), Vol. 2, pp. 154–5.
On all this see Nassau W. Senior, Three Lectures on the Cost of Obtaining Money (London, 1830)
J.E. Cairnes, Some Leading Principles of Political Economy newly expounded (London, 1874), pp. 355–407, and
Essays in Political Economy, theoretical and applied (London, 1873), pp. 1–50
F.W. Taussig, Free Trade, the Tariff and Reciprocity (New York, 1920), pp. 48–94. If wages are artificially out of equilibrium the theory becomes more complicated, but it would be absurd to deny that, broadly speaking, it remains applicable. With all the artificial rigidity in modern wage structures it still remains true that productivity is the main determinant. It is fundamentally important in judging such matters to preserve some sense of proportion.
R.G. Hawtrey, The Economic Problem (London, 1926), p. 289. See also Good and Bad Trade, An Inquiry into the Causes of Trade Fluctuations (London, 1913), Chapter XVIII, for some exceedingly illuminating observations on this aspect of the problem.
See e.g. T.E. Gregory, Tariffs: A Study in Method (London, 1921).
See e.g. a very illuminating letter from Mr. John Strachey in The Nation and Athenaeum, January 3, 1931.
It would be a mistake to identify Mr. Keynes’s desire to increase the favourable balance of trade with the general run of theories concerning the trade balance, current in the eighteenth century. According to Professor Viner, Sir James Steuart, who wrote in 1767, is “the only mercantilist who even cites the desirability of investment abroad as one of the reasons for desiring a favourable balance.” See Jacob Viner, “English theories of foreign trade before Adam Smith,” Journal of Political Economy, vol. 38 (June and August 1930), pp. 294–301 and 404–57.
Essays, moral, political and literary, eds T.H. Green and T.H. Grose (London, 1875), Vol. I, p. 335.
It is interesting to notice that in the chart given in Dr. C.K. Hobson’s The Export of Capital (London, 1914), p. 222, on which are recorded fluctuations in employment, the export surplus and public issues for foreign investment, there is no obvious correlation between employment and the difference between foreign issues and the export surplus. I would not press this very far as no doubt the figures of public issues are by no means the whole story. But the apparent absence of correlation is at least worthy of notice.
I do not understand this to be the view of either Professor Ohlin or of Dr. Haberler, each of whom has expressed the view that Mr. Keynes’s pronouncements on the transfer problem overstress the difficulties and overlook certain theoretical probabilities. See their discussion of this matter in recent numbers of the Zeitschrift für Nationalökonomie: — Gottfried Haberler, “Transfer und Preisbewegung,” vol. 1 (1930), pp. 547–54, and Vol. 2 (1931), pp. 100–2
Bertil Ohlin, “Transfer und Preisbewegung,” vol. 1 (1930), pp. 762–5.
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Robbins, L. (1997). Economic Notes on Some Arguments for Protection. In: Howson, S. (eds) Economic Science and Political Economy. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-12761-0_8
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