Economics Volume II: Modern Economic ProblemsFetter, Frank A. (Frank Albert)
General
Economics Volume II: Modern Economic Problems
Fetter, Frank A. (Frank Albert)
Economics
The main economic claim made in the home-market argument is that the
shipping of food to Europe and the importing of manufactures involve
a great cost for double freights which could be saved by manufacturing
at home. The farmer is supposed to pay this cost. The obvious defects
in this view are: first, there is nothing to show that the freight is
not partly or entirely paid by the European, either the manufacturer
or the food consumer; secondly, home trade "saves the freights" for
the farmer only in case he can buy goods under a tariff with less
of his own labor and products than under free trade. The payment of
freight charges is true economy when the goods can be bought at a
distance on more favorable terms than near home. The freight argument
attempts to prove too much for it condemns every trade within the
country, of goods produced a stone's throw away from the consumer.
The home-market appeal is strongest when addressed not to all farmers,
but to one class of farmers, those whose lands are situated nearer the
manufacturing cities. As city population grows, some land is converted
from the extensive cultivation of corn and wheat to dairying, fruit-
and market-gardening in the neighborhood of cities, and perhaps at
length is used for factory sites or as city lots. There is, thus, a
partial validity in the argument as applied to a comparatively small
number of farmers, who gain as landlords, not as tillers of the soil.
Even greater gains have sometimes been reaped by the owners of timber
lands, ore mines, coal lands, and other natural resources, the values
of which have been raised by tariff legislation. But unless these
gains come from truly productive additions due to the tariff, there is
no benefit to the community as a whole.
#§ 6. The "two-profits" argument.# Somewhat related to this idea of
the saving of two freights is the "two-profits" argument. It is said
that the tariff keeps "two profits" at home, foreign trade gives but
one. The word "profits" is here used in the popular sense of gain from
a single transaction. Both parties are said to profit and both profits
are thought to be secured at home when two citizens are forced to
trade with each other. The view that there are "two profits" in a
trade is an advance upon the notion that "one man's gain is another's
loss,"[3] but there is an error in elementary arithmetic here, both as
to the number and as to the aggregate amount of profits. The purpose
of a protective tariff is to compel two of the citizens of a country
to trade with each other instead of trading with two citizens of a
foreign state; the number of profits made by each country is therefore
not increased by substituting domestic for foreign trade.
Public-domain text, read in full here on John Shaqi.
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