Reply To: Factors Fueling American Industrialization – Govt Intervention/Laissez Faire


It’s great to see a U.S. History teacher on Liberty Classroom! Let’s give our kids the real American History!

The basic theoretical point (Hazlitt has all the basics in Economics in One Lesson): Tariffs hinder production and increases in the standard of living. If consumers can buy sweaters for $30 that are imported rather than buy domestic sweaters for $50, then they have $20 left over to save, invest, or purchase something else. When the govt uses a tariff and to bump up the price of foreign sweaters, then consumers don’t have as much leftover money to save, invest or purchase something else. However, we want consumers to have the extra money because when they save, invest, and purchase other items that gives other businesses a chance to produce and sell goods that otherwise would have gone un-produced or un-sold. Ultimately, productivity is what allows for increases in the standard of living.

Also, a separate issue is that countries frequently issue tariffs in retaliation. So, the consumers lose twice because the have to pay higher prices on more than one item (on sweaters AND shoes for example).

The experts can probably articulate that better than I did above, but that is the gist!