The argument that tariffs increase the price of imported goods is exactly the same as the argument that gas taxes increase the price of gasoline.
One might counter that it is theoretically possible for a particular tariff not to increase prices. That is true. It is also theoretically possible for an increase in gasoline taxes not to increase gasoline prices. In either case, it is possible for sellers to bear 100% of the tax. The chances of that happening in the real world are extremely small, especially for tariffs that apply to all countries.
Matt Iglesias Recently, I retweeted a tweet from Scott Linthicum and added my own comment.
I think Iglesias is overstating the level of disagreement here. This may seem like a strange claim, since he uses the phrase “very little disagreement” and cites studies that show only 5% disagreement. Still, I believe he is overstating the level of disagreement. I think it’s probably well below 1%.
The poll question asked about the effect of tariffs on “general economic welfare.” A few economists (not many) think that tariffs can increase welfare and support tariffs. But that is almost certainly not because they think that tariffs avoid rising prices. Suppose, for example, that an economist thinks that the loss of blue-collar jobs due to imports is a bigger problem than rising prices. This is not an unreasonable claim, but I happen to think it is wrong, in part for reasons I give in my next paragraph. Previous articleI don’t think jobs will be protected.
The few economists who support protectionism argue that tariffs Probably. Unless we raise prices, we will be unable to protect domestic industries from cheap imports, nor will we be able to protect jobs in import-competitive industries.
Some may think I’m exaggerating the difference between a 5% minority and a 0.5% minority. But I worry that if 95% of economists believe a proposition to be true, people will assume that the proposition is almost certainly true. If 50 economists out of 1,000 hold heterodox opinions on a particular subject, the chances that they are right are certainly not that unlikely; the odds are much higher than 5%. Consider the case where 95% of economists think that there is a 75% chance that X is true, and 5% of economists think that there is only a 25% chance that X is true. If you poll, you might find that 95% of economists think that X is true, but in fact there is only a 75% chance that X is true. Even if 95% of it is completely correct.
I am one of a very small minority of economists who believe that the Fed caused the 2008 recession with its tight monetary policy. But just because polls show that 99% of economists think I’m wrong doesn’t mean there’s a 99% chance that I’m wrong. In fact, I’m not convinced that many economists who disagree with me would be willing to bet $100 on whether alternative monetary policies in 2008 would have prevented a big decline in NGDP, and only win $102, especially considering that the zero lower bound hadn’t even been reached back then. (Yes, this would be hard to test, but imagine what it would be like if there was a test.)
Economists in the poll certainly something It’s useful information about what experts believe, but it’s important not to overestimate the importance of a majority of economists taking one side on an issue. It’s not meaningless, but it’s not definitive either.
P.S.: It’s possible that the poll question about whether tariffs will raise prices would produce the same heretical 5% result, in which case a few economists may simply be very eccentric, but I still believe the figure is well below 5%, especially when the two questions are asked consecutively and the economists surveyed are reminded that the two questions are separate.
PPS. Within an hour of finishing this post, I economist Then I came across this article about the Russian economy:
Russia’s GDP Russia’s real GDP will rise by more than 3% this year, continuing the fastest growth since the early 2010s. Economic activity “increased substantially” in May and June, according to the Central Bank of Russia. Other “real-time” activity indicators, including those published by Goldman Sachs, show that the economy is accelerating (see Figure 1). Unemployment is near record lows. Inflation is too high. Price growth in July was 9.1% year-on-year, above the central bank’s 4% target, but with cash incomes up 14% year-on-year, Russians’ purchasing power is growing rapidly. In contrast to people in most other countries, Russians feel good about the economy.
In 2022, I would estimate that over 95% of economists, including myself, were wrong about how the war in Ukraine and the resulting sanctions would affect the Russian economy. 95% of economists are usually right, but they are wrong in a surprising number of cases.
