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than they to determine the form of cultivation. There is also little doubt that this would be contrary to the interest of the community. Less wealth would be produced either for consumption or for international trade. Fewer people could be supported, or the same number would not be as well supported as formerly.

If the nineteen men thrown out of employment cannot find places elsewhere they will, since they want to live, probably offer their labor at lower wages,-enough lower to enable the landlord to get as much rent from the more intensive form of cultivation as he might get by the less intensive form. Here we have the somewhat anomalous situation of an increase in the price of one of the products of industry causing a fall in the price of labor. The key to this anomaly is found in the fact that what is cost to one man is frequently gain to another. Now in this supposed case (which is not altogether a supposed case) there is little doubt that some form of discrimination in favor of the present crop and against wool would increase not only the relative share of the produce going to labor but the absolute amount of the produce of the land that would otherwise be devoted to wool-growing.

And this is a rule which works both ways. In a community where land is extensively cultivated, it is presumably because extensive cultivation produces the best results from the standpoint of the landowner. Any one of the following conditions may induce him to change to intensive cultivation: (1) a fall in the price of labor; (2) a fall in the price of the products of extensive cultivation; (3) a rise in the price of the products of intensive cultivation. There lies the opportunity for the protectionist. By some discrimination which would tend to increase the profitableness of the intensive product, an absolutely larger and more valuable product might be created. This would support a larger number of people, or support them better. They would have a larger number of products either for consumption or for international trade. Labor and capital would have been attracted from the less productive to the more productive indus

try. Since a protective tariff is one means by which the relative profitableness of different industries may be changed, it follows that a protective tariff may be a means of increasing the total product of the industry of the community.

It may be argued,' however, that "either these nineteen men have a preferable alternative, under the free-trade régime, to wheat-raising, or they have not. If they have not they will accept low enough wages, rather than be unemployed and have nothing, so that the landowner can realize as much rent for his land as if he used it for a sheep run. Unless their efficiency is thus impaired they will then produce as much wheat as if they were protected. The effect of freedom from restriction may mean, in this special type of case, lower wages and higher rent, but not decreased national wealth. If, however, the nineteen men have a preferable alternative they will not raise wheat but will occupy themselves otherwise at higher wages than wheat-raising under free trade would yield them, while the landowner will at the same time realize the higher rent assumed to result from using his land as a sheep run. Free trade would then raise rent more than it would lower wages."

To this it may be replied that "in case the nineteen laborers decided to accept lower wages and continue growing wheat, there need not be any diminution in the total product. The result would simply be lower wages, higher rent, and the same total product as before, as has been shown already. In case, however, the nineteen laborers decide to enter some other calling it must, of course, be a somewhat more remunerative one than wheat-growing under the new conditions. It could not, however, be so remunerative as wheat-growing had been under the earlier conditions, before the assumed rise in the price of wool; otherwise they would not have been growing wheat in preference to following this new occupation. In short, their wages are somewhat reduced by the enforced change as compared with what they were formerly getting, but not so much

1 See note by H. G. Brown and the author's rejoinder in the Quarterly Journal of Economics for May, 1919, pp. 568-572.

reduced as they would be if they had no alternative employment but were compelled to continue growing wheat at such wages as would leave the landowner as high rent as he might get by turning his land into sheep pasture. When this alternative occupation is open, the changes assumed would raise rent and reduce wages somewhat, but not so much as in the other case.

"Will these changes raise rent more than they will lower wages? Yes, if we are thinking of world economy; not necessarily if we are thinking of national economy. In order to find a satisfactory alternative employment the nineteen laborers may emigrate. In case they do, the national product will obviously be reduced and will support a smaller population, though the landowner's rent would be slightly increased. From the standpoint of world economy the increase of the total productivity of industry is probably not among the theoretical possibilities of protectionism; from the standpoint of national economy, it is. The protectionist is, rightly or wrongly, commonly a nationalist, and from his point of view he finds here at least a theoretical possibility."

Free buying and selling not always socially advantageous. The argument of the protectionist in its most general form is that free and unrestricted buying and selling does not necessarily or in all cases result in the highest utility to the nationin other words, that the market price is not an invariable indicator of social utility. If this were true, so that following the best market price would invariably lead individuals to promote the highest social utility, there would never be any valid ground for protectionism or any other interference with business, internal or external; domestic or foreign. If, however, following the best market price, either in buying or selling, may sometimes lead individuals to do things which are not of the highest social utility, there is at least a theoretical possibility of advantageous interference with the process of free buying and selling. One could not optimistically close his eyes and say "everything is working for the best" without any interference or regulation whatsoever. There is at least a theoretical possibility for im

provement through restrictive regulation. The practical probability, however, is limited by the wisdom or disinterestedness of lawmakers and administrative officials. If they are no wiser or more disinterested than the average buyer and seller, that probability is very small.

Regulation not always wise. Whether this theoretical possibility for improvement through restriction or regulation can be realized depends somewhat on the character of the government and its officials. The free trader has at least the opportunity to say that government is just as inefficient as business; that following the election is just as likely to lead one astray as following the market; that the political policy that will get the most votes is just as likely to be wrong as the commercial policy that will get the most money. Even granting, therefore, the theoretical possibilities of wise protectionism, he might deny the probability of ever realizing these possibilities and affirm on the contrary that the general experience is that when governments attempt to interfere with freedom of trade by any sort of protective policy, they usually make matters worse instead of better; that they are just as likely to protect the industry that ought not to have protection as the one that ought to have it; and that therefore the free-trade policy works better in the long run than the protective policy, in spite of all the theoretical possibilities of protectionism. The writer adheres to this opinion, not only with respect to the question of free trade and protectionism but with respect to most other questions of government interference.

COLLATERAL READING

DUNBAR, CHARLES F. The Theory and History of Banking (third edition, revised and enlarged by Oliver M. W. Sprague). New York, 1917. (The clearest exposition of the subject yet published.)

PIERSON, N. G. Principles of Economics, Part I, chap. i, §§ 2-6. New York, 1902. (A clear exposition of the theory of value.)

TAUSSIG, F. W. Principles of Economics, Book IV. New York, 1911. (A most complete statement of the principles governing international trade.)

PART V. DISTRIBUTION

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