It will then be necessary to increase them, which is to say to look for the cure in making the disease worse.

Frédéric Bastiat
Complete Works, Volume 1, pages 334 to 386 (in French)
October 1844

This quote pertains to tariffs. After noting that the United Kingdom started to go in the direction of international free trade while France engaged itself towards the opposite direction, Frédéric Bastiat describes the virtuous circle entered by the former and the vicious circle into which the latter is doomed to go through.

The point of tariffs in a protectionist regime is to increase prices in order to favour “national” producers who cannot face foreign competitiveness. What Frédéric Bastiat is predicting is that the low prices practiced abroad will allow for an increase in competitiveness, which will not be the case for national producers who, while benefiting from artificially high selling prices, will also have to face high production costs. Let’s add to this that that higher prices will naturally reduce scale economies that could be done while the foreigners will benefit from higher volumes thanks to lower costs and lower selling prices. Thus the consequence is that, if tariffs allow for the exclusion of foreign competition today thanks to the elimination of their price competitiveness, the economic dynamics will make them insufficiently high in the future when they will have to be increased again (and reinforce the vicious circle).

What I find depressing is that the phenomenon which consists in implementing a short-sighted policy that is fundamentally flawed and that is then reinforced rather than abolished when its failure is ascertained is a regular feature of economic policies that governments think can be pursued. Unfortunately, this is inevitable. It is illusory to believe that a bunch of people in power, as smart and sincere as they could be, would be able to proceed to capital allocation in a more optimal way than the millions of individuals participating to the different markets and whose decisions are coordinated by prices.

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