There have been some ridiculous market distortions imposed by our government in its effort to replace vehicles powered by gasoline and diesel with those powered by electricity, but perhaps none is more ridiculous than the various subsidies designed to...

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In my latest column for AIER, I explain how the case for protectionism typically relies on the fallacy of composition – giving a new twist to what is seen and what is not seen. A slice:

Early on in my introductory economics course I warn my students always to beware of various logical fallacies, none of which is more prone to sow confusion than the fallacy of composition. This fallacy is committed whenever someone concludes that that which is true for a part of the group is necessarily true for all of the group. The classic example is standing up in a stadium to get a better view of the game. If one or a small number of people stand up, these folks do indeed enjoy a better view. But obviously it’s mistaken to conclude that “therefore, if everyone stands up, everyone will get a better view.”

Protectionists commit the fallacy of composition whenever they point – as they incessantly do – to particular firms that get more sales, and to workers who keep particular jobs, as a result of tariffs and other trade restrictions. No serious student of trade has ever denied that protectionism can protect particular firms and workers who are awarded protection. But nor has any serious student of trade failed to see that the protection enjoyed by the few comes at the larger expense of the many.

The example of standing up in the stadium is useful for exposing some of the significant negative consequences of protectionism – consequences stubbornly ignored by protectionists.

The first of these typically overlooked consequences is that, just as someone who stands up in a stadium worsens the view of several people sitting behind him, protection granted to a few producers worsens the economic prospects of more than a few fellow citizens. The most obvious victims are final consumers of the protected goods. These consumers suffer by having to pay higher prices and perhaps also enduring lower quality. Their standard of living falls.

Consumers aren’t alone in their victimization. Domestic producers who use imports as inputs in their own operations also suffer. With their costs raised by protective measures, these producers must raise their prices and scale back production. And as they scale back production they lay off some of their workers. These workers eventually find other jobs, but because protection diverts capital away from more-efficient to less-efficient industries, the new jobs these workers find will generally be less productive and, hence, pay lower wages.

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