Failure to Indulge to Oren Cass’s Nationalist Delusions Isn’t An “Externality”

“Donald Trump’s proposal to impose tariffs as high as 60 percent on imports from China, and a global tariff of 10 to 20 percent,” Oren Cass argues at The Atlantic, “takes the right approach to addressing globalization’s failures — but it has drawn resounding mockery from economists, and, in turn, from the mainstream media.”

While Cass, usually described as an “economic nationalist” or “national conservative,” cheerfully concedes that tariffs harm consumers in terms of their spending power, he claims that the economists who point out those costs fail to see commensurate benefits.

“The basic premise,” he writes, “is that domestic production has value beyond what markets reflect.”

The consumer who prefers paying $1 for a widget made in China to paying $2 for a widget made in the US, he correctly argues, “will probably not consider the broader importance of making things in America.”

Question: Why SHOULD that consumer consider that “broader importance?”

Well, says Cass, not doing so creates negative externalities — indirect costs to uninvolved third parties.

Which is where his argument falls apart, because the supposed externalities he describes either don’t exist or are net positive externalities to any version of “America” where broad freedom and prosperity are considered more valuable than the warm feeling one gets from indulging the authoritarian fantasies of Oren Cass.

Cass’s claimed externalities fall into three main, interrelated categories: “National security,” innovation, and supply chain resilience.

The solution to all three of these supposed “problems,” if they actually exist, is … freer trade.

Protectionism increases the likelihood of war, while freer trade decreases that likelihood. As Otto Mallery put it, “if soldiers are not to cross international boundaries on missions of war, goods must cross them on missions of peace.”

Innovation is no respecter of national borders. If someone has a good idea, that idea will make its way around the world and enjoy adoption everywhere. Yes, even in countries where people and governments fall for Cass’s siren song of economic insanity — just more slowly and less profitably, because Cass-style “protection” is itself a massive negative externality.

Tariffs fray supply chains, while free trade — and freer trade’s “peace dividend,” a reduced need for military spending in the name of “national security” — incentivizes building the most robust and efficient supply chains possible.

Cass’s real argument for protectionism is that freer trade thwarts his fantasy of a “national greatness”  powered by his terrible economics and our obedience. That argument is indeed correct.

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