Posted on 01/23/2003 6:06:25 PM PST by one2many
Your mathematical "proof" shows only that there is a potential COST involved with the application of a tariff, that's all. That there is an "inescapable negative influence on the welfare of the country" as a result of adding a cost to certain imports, is pure bullshit.
Now according to you
under a free market, that market will adjust and incorporate such costs on its own and continue to trend toward trade where the comparative advantages exist.
So, when a tariff, or other COST raises the comparative price of a product, the market adjusts by seeking the product at a better comparative advantage.
Theorectically, the added COST of shipping cotton from Charleston, to Belfast, NI versus New York City (or god forbid, to a textile mill in South Carolina), would also have made European products more expensive. Now we see why you danced around the question earlier.
The effect of tariffs on FOREIGN products meant the United States paid MORE for manufactured goods from England, and (according to your own thesis) should have produced an increase in DOMESTIC trade to avoid that COST. Specifically between the south and the north, which had offsetting and complimentary comparative advantages.
That you consider this to be a "negative influence on the welfare of the nation", provides insight into how little you understand or care about the history of the United States.
Evidently your literacy level leaves as much to be desired as your glaringly deficient understanding of markets
LOL! -Thanks, coming from you thats a compliment.
No. It shows that, by its very nature, that cost outweighs the protective returns to the producer in the benefitting industry. The result, due to the dead weight losses, is inevitably a net loss in the overall welfare of the country when compared to what occurs absent the tariff.
That there is an "inescapable negative influence on the welfare of the country" as a result of adding a cost to certain imports, is pure bullshit.
Not at all. It is a mathematical certainty caused by the sloped curves of supply and demand. Though I suppose this is hard to describe without a way to draw those curves, I will attempt a description for you:
First visualize a supply-demand diagram (a positively sloped and a negatively sloped line that intersect in the first quadrant). Since this graph represents a candidate good for a protective tariff, it is likely that the world price is lower than the autarky price at the intersection. The world price under free trade will accordingly be lower than the intersection point, which is why the domestic producers want a tariff.
Under free trade, that world price - represented by a vertical line to the corresponding Y variable of price - creates a consumer surplus of that which is above it but to the left of the demand curve. Enact a tariff, and that world price line rises with the tariff, thus removing part of the consumer surplus. to the other side of that line. That which is below the new post-tariff price line but to the left of the supply curve is the part redistributed to the producer. But since the demand curve, at the point of the pre-tariff price, extends to the right of the supply curve at that same price, there still remains a part of the consumer surplus that is not redistributed. Mathematically this part is divided into government reciepts from the tariff (mathematically contained in the "rectangle" between the new price's two intersects and the old pre-tariff price) and the deadweight losses (the triangular segments of the consumer surplus on either side of the square). Because those deadweight loss segments are removed from the economy, that of the consumer surplus that returns by way of the producer and government is inevitably less than that which was removed in the first place. Hence a net loss will occur from a protective tariff.
Theorectically, the added COST of shipping cotton from Charleston, to Belfast, NI versus New York City (or god forbid, to a textile mill in South Carolina), would also have made European products more expensive.
You are still missing the point and spouting a command-style approach to economic distribution that completely neglects the demand portion of the equation. A producer's goal is to sell a good at the market price. He'll take a buyer from anywhere so long as that price is paid, and in fact he has to since agricultural markets are very close to perfectly competitive. In other words, why send all the cotton to NYC if NYC only demands X ammount of cotton that they will pay for? This is especially so when Europe is also demanding Y ammount of cotton and offering to pay the same market price. As a result, the cotton goes to whoever buys it by whatever means they may use to get there. In theory, some transit means will under certain conditions cost more than others, but as a whole this is negligable and adjusted for by the market.
The effect of tariffs on FOREIGN products meant the United States paid MORE for manufactured goods from England
No they didn't. If that were so, trade would not have occurred as it did because everybody would have bought the domestic products instead of the foreign ones.
and (according to your own thesis) should have produced an increase in DOMESTIC trade to avoid that COST.
Not when Britain is comparatively better at manufacturing the same product than the domestic producers are. In fact, that is precisely why the domestic guys wanted a tariff - they claimed that they could not compete with the lower prices from abroad, and demanded "protection" from that competition.
Specifically between the south and the north, which had offsetting and complimentary comparative advantages.
Complementary comparative advantages in one area does not preclude the existence of greater comparative advantages in another. Europe at the time had greater comparative advantages in many industries than the north did. That is why the north wanted tariffs to protect them in the first place.
That you consider this to be a "negative influence on the welfare of the nation", provides insight into how little you understand or care about the history of the United States.
Much to the contrary. That you are spouting a mixture of antiquated 200 year old mercantilist nonsense and command style economic planning in the year 2003 indicates, if nothing else, that you have not the slightest clue how markets work. You fail to even comprehend the straight-forward and easily followed mathematical proof of my argument, much less rebut it. It truly makes me wonder whether I should laugh at you or pity you.
LOL! -Thanks, coming from you thats a compliment.
If you desire to take pride in your ignorance, who am I to stop you? I suppose that there is bliss in ignorance after all, as you certainly appear to have found it!
What is the exact ratio of G to L? What is the reason that L even occurs and how is it measured? Why don't other COST increases (like transportation) have an L factor also?
Expressed mathematically: C=P+G+L, or the area that shifts as a result of the tariff's price rise. Absent the protective tariff, the economy retains all of C as a consumer surplus. The economic welfare of the country without a tariff, denoted as "W," includes all of C. Now let's look at what happens mathematically with the tariff. Subtract C from Wt (Wt means W with the tariff) because of the price rise after the tariff. P is transfered out of C to the fishing industry and returns to the economy, so add it back to Wt. You may also add G to Wt as it returns in the form of government expenditures, though they will as a general rule be spent less efficiently there.
Yeah, you do the hokey pokey and you shake it all around...
Since L is lost, the tariff leaves us with Wt + -C + P + G. Since C = P + G + L, it may be substituted in giving us Wt + -P + -G + -L + P + G. Combine the terms, and Wt = -L.
That makes Wt < W
When you create a formula that assumes an action creates a "dead weight loss", of course. You could have just as easily stated
W = economy without tariff, Wt = economy with tariff. Wt= W-L.
Therefore Wt < Wt.
Once again, this formula is your straw man and its not fooling anyone. The invisible graphs won't work either (lol).
Why don't you try researching the actual costs of producing manufatured goods in the mid-19th century from both the american and european (british) perspectives. Write a formula based on that and demonstrate how tariffs ruined the american economy.
It all depends on the tariff type and the shape of the supply and demand curves. Typically though L is more from the cases I've seen.
What is the reason that L even occurs and how is it measured?
Mathematically, it occurs because demand and supply curves are sloped while the difference in government revenue is measured vertically. The deadweight losses (L) are measured mathematically as well by simply calculating the area of the two deadweight loss regions on a plotted tariff graph. Since these are often triangular in linear functions, you calculate it by 1/2 base x height. Why don't other COST increases (like transportation)
Unlike the tariff, they are automatically built into the market. The tariff is a government policy imposed to alter the free market conditions.
Yeah, you do the hokey pokey and you shake it all around...
No. You take money out of the private sector, give it to the government, and the chance that the government will spend it in a comparatively inefficient manner is virtually certain.
When you create a formula that assumes an action creates a "dead weight loss", of course.
It's not an assumption. It's a mathematical certainty. Supply is positively sloped and demand is negatively sloped. If I draw a horizontal line at the world price level crossing those two curves below their intersect, and then draw a parallel horizontal line above it indicating the new price including the ammount of the tariffs, the distance between the price line's intersect with each curve decreases. G mathematically covers the area in between the two new intersects and down vertically from them to the old price line. That still leaves two triangles on either side of G, and they are L - the deadweight losses.
Once again, this formula is your straw man and its not fooling anyone.
Do you even know what a straw man is? It certainly doesn't appear so. Nor does it appear that you have a clue what you are talking about. The formula I posted for you may be found in any scholarly economics text on the nature of tariffs. That formula says you are wrong and its application mathematically proves that you are wrong. You may not like the fact that you are wrong, but that is not my concern. My point is to show that according to the rules of economics you are wrong, and to that end I have done so without any credible refutation whatsoever on your part.
The invisible graphs won't work either (lol).
Hey, don't blame me. It's not my fault that you lack the mental capacity to visualize a simple mathematical plot in your mind seeing as this method of communication does not permit any other way to convey it to you.
Why don't you try researching the actual costs of producing manufatured goods in the mid-19th century from both the american and european (british) perspectives.
I certainly could, pending time to do so, but seeing as I can say with certainty right here and right now that Europe had the comparative advantages, doing such research is not a priority. How do I know this, you may ask? Because if it were not so, there would have been no reason for the domestic guys to advocate a tariff in the first place - they would have had the market all to themselves by way of a lower price than the imports.
Write a formula based on that and demonstrate how tariffs ruined the american economy.
No need to. You may find it already demonstrated in both the New York Times and the Times of London shortly after the previous year's trade stats came out in 1862.
Huh?
What did I say that your formula proves otherwise?
Have you been talking to yourself again?
In an act of random idiocy on your part, you declared it a "straw man" and alleged incorrectly that it had been designed to reach an assumption.
Then either you did not read the formula as you claim, or you should be able to show the mathematical error within it.
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