 All right, so our topic here for this talk is free trade versus protectionism. And this is one of those topics that I find somewhat challenging to talk about, because it feels very much like beating a dead horse. We've been having arguments about free trade versus protectionism for like 200 years, over 200 years now. And Adam Smith and David Ricardo had pretty good arguments over 200 years ago. So it's one of those things where it feels very difficult to come up with something that is both new and correct. That's very difficult to do. And in fact, if you look amongst economists, economists are generally on board with free trade. Very recently, I think it was 2020, there was a survey done of the American Economic Association. So certainly not an Austrian-dominated organization by any means. And they found that 95% of economists agreed with a statement that tariffs and import quotas are generally harmful. 95% agreement amongst economists is pretty hard to find. It's not something that's typical. But yes, we're all on board with this. Yet nonetheless, we need to take this horse and beat it again. Why? Because the rest of the world has not yet agreed with us. So you ask the populace, the population is very skeptical about free trade. You look at politicians. Politicians are often very skeptical about free trade. And this is a long tradition, it turns out, in American politics, going all the way back to George Washington, who was very skeptical of free trade, probably under the influence of Alexander Hamilton to a large degree. And even when you look at those politicians, they sound somewhat more favorable toward free trade. They talk about free trade kind of like it's like getting to heaven. Yeah, we want to do it. Just not yet. So when you look outside of economics, it's very clear that there is more to be said. Even if it's the same thing we've said before, apparently, we have not yet been totally convincing. So let's go ahead and take this dead or apparently undead horse and beat it again, see if we can put it to rest for good. So first, I just want to lay out some basic definitions. So what do we mean by free trade? So I'm going to use this definition that free trade is allowing the purchase and sale of goods across national borders without any restriction, without any additional tariffs or these types of things placed upon them. That we treat buying and selling across national borders exactly the same as we treat buying and selling within those national borders. We make no distinction where the good is coming from. Now, protectionism then is the negation of that. That is, we would have some kind of restriction place. Specifically, I'm going to look at restrictions on imports from other countries. Now, typically, this would take the form of a tariff that is a tax placed on these imports. Because it came from another country, you have to pay more. You have to pay this additional tax. Or some type of import quota. That is where we place limits on how much of a good can come from outside of the nation's borders. So I first want to start out then by giving a case for free trade. Now, the first case I'm going to make is a bad one. Time is limited. Why are you doing this, Professor? Well, because I think it's an argument that I've heard made before and probably have made myself, if I'm honest. So I think it's important to put it out there and then talk about why this is not the way we should actually argue if we're going to be convincing. The argument goes something like this. So if it's not good for Americans to buy Mexican goods, then it's probably not good for Alabamans to buy Floridian goods. If it's not good for Alabamans to buy Floridian goods, then it's probably not good for my household to buy any goods from anybody else. So this is, it looks you out of absurdum. So bring it all the way down to the individual level. None of us should trade with anyone else. And of course, it's obvious if nobody trades with anyone else, a great majority, I suspect, of humankind is going to die. And I'm very sure that I will be one of those people that will die. I have a garden. I have to talk about the garden every year. If you've been here before, you know this is an annual tradition. This year, I planted some lettuce. I'm still waiting for it to come up. I planted it in May. Nothing. I planted radishes. We've got four radishes. We did not eat the four radishes. What are you going to do with four? My apples look really good. But I would starve to death before they're going to be ready come September, October. So if I was left to just try to produce for myself, we know that I would die, as would my children and my wife. And none of us particularly want that to happen. Therefore, free trade is good. That's the completion of the argument. So why is this not a good argument? Why can't we just redutch the idea of this? Well, it turns out protectionists very rarely argue against trade itself. They're not saying that Americans should never buy anything from anywhere else. Instead, what they're saying is that at times, specific cases, we need to have some types of restrictions placed on trade. That's a very different argument, which means that the reduxio ad absurdum doesn't work, because I'm just building a straw man and tearing it down. And those that are opposing us will just say this is not our argument at all. And they're actually correct. So what then is actually a valid case for free trade? Now, this might sound superficially similar, but it's nonetheless somewhat different. So I want you to think back. It turns out I don't have to say much original about this, either. You've already heard a lot of this this week. So think back to Monday morning, the first lecture given by Dr. Salerno. And he gave an example about, well, what if we have these two farmers? One of them has a cow, the other has a horse. But the one with the cow wants a horse, the one with the horse wants a cow. Well, it could be made better off by trading with each other. Then you end up with the thing you want. I would submit that this is true even if we draw a line between the two farmers, name one of them Miguel and name the other one Kevin. It's still true. It makes sense for the two of them to trade. They're both made better off, even if there's this political boundary drawn between them. So mutual benefit that we get from exchange, from voluntary exchange, is true regardless whether there's a national border between people or not. The second argument that we'd build on this, I want you to think back to Dr. Rittenauer's lecture about the division of labor in the social order. So we have Groucho and Harpo producing beef and producing mangoes. Now to make sense for us to specialize, according to our efficiency, it must be the case that if I'm producing mangoes, I don't just want to eat mangoes. I'd want to trade the other thing I actually want, which is some beef, some mangoes, perhaps, that kind of thing. So having trade on top of specialization is important in getting the division of labor to work. So let's take Groucho and Harpo, but then put them on opposite sides of a border. Is it still true that it makes sense for each of them to specialize in the area of efficiency? Will they, in fact, be more physically productive by doing this? Well, yes, drawing a line between them doesn't change that. So again, all of the arguments we make about how the division of labor is important, and in fact, aids and prosperity and human wellbeing still apply and is an argument then for free trade, why we should allow purchasing and selling of goods across national borders. And so we have mutual benefit from exchange. We have all the benefits that come from the division of labor. All of these arguments are still valid, even if you draw a line between people. And I want to add one more to this. And that is that free trade between nations, in particular, is beneficial because when people regularly trade with each other, our wellbeing becomes bound together. That is, I am better off if somebody that I regularly trade with is made better off as well. I want my mechanic to do well because I want to be able to continue buying his services. I don't want him to go out of business. So my wellbeing is tied to his wellbeing and vice versa. And what that then also means is that I want to make sure that I have a peaceful relationship with my mechanic, that we actually are getting along well, that kind of thing. And this is especially important across national borders. Like I want to make sure that the country I live in is living peaceably with its neighbors, and also those that are not its neighbors given the ability for us to transport armies all around the world as America's fond of doing. So we want to have peaceable relations and having trade with other countries is something that aids this by binding our wellbeing together. And so I think these are three fairly strong arguments we can make for free trade. And really, these are all things that just relate to any type of trade as being beneficial. So if we're interested in benefiting mankind, if we're interested in human flourishing, if we're interested in peace and prosperity, we should favor free trade. It's not just that protectionism would lead us all to starve, that we can actually make the case even against the moderate protectionist that just want to throw a tariff on something. All right, so now let's turn to looking at arguments for protectionism. And then we'll answer these arguments. I'm not just gonna spend 35 minutes defending the opposite view. So, okay, now the arguments for protectionism, it turns out there's a fairly long list of them. Because it's not like there's a single philosophy that is protectionism that then we can pick apart. Instead, protectionism tends to have lots of different arguments that feel kind of ad hoc. In this case, we need to have protection because of this. In this case, we need to have protection because of that. So we have a number of arguments we have to deal with and I very much doubt that the next 35 minutes is enough to deal with every possible argument that you might hear. But at least try to hit the high points, those that are most common. Okay, so let's start with one of those. The first is the balance of trade argument. So the balance of trade argument is probably one of the oldest arguments for protection. It is in fact what Adam Smith was arguing against in the wealth of nations and inquiring to the nature and causes of the wealth of nations. The full title is important there. It's the argument that he was having to deal with and it's the classic mercantilist argument which says that our country's made better off is wealthier if we have more money in it. How do you get more money into your country? You export a lot of goods that have lots of monetary value so we sell a lot abroad. We don't import too much. Every time you export, money comes in. Every time you import, money goes out. So you wanna make sure your exports are more than your imports and that brings wealth into your society. Now Adam Smith's answer to this was in part an inquiring to the nature of the wealth of nations and he questioned this idea, does more money in your economy actually make you wealthier? He says no, it's your ability to produce. That's why the division of labor matters. But I want to look at a couple forms of this. Oh, but first, this is not an argument that died in 1700s. It's still around. In fact, fairly recently, this was sometime in the past five, six years I suspect, President Donald Trump said this, we've been the foolish country for so long with this free trade. But it's not free trade because it just doesn't work. I mean, it's not working. You look at the deficits we have. The argument he's making that free trade's a problem is that we have these big trade deficits. Now he's factually correct that there are big trade deficits in the US. We've had big trade deficits for about 50 years at this point. So the question is, is this then actually an argument against free trade? The fact is there that the deficits exist. Is this a problem? So I'm gonna look at two versions of the deficit argument. So the first version is looking at a specific country. So one thing that President Trump was very fond of talking about was the fact that we have very large trade deficits with China in particular. I went searching for these types of quotes and the like and I found one, I guess an icon or something like that that was used by the Trump administration where they had this, it's like a scale. And then on the one side, you had the trade deficit with China. And the other side was the trade deficit with everyone else. Why these would be two sides of a scale that we'd expect to balance? I have no idea, it's a really bizarre choice. But oh, look how big our trade deficit is with China. So it shows that we have big problems here. So I'd like to draw a quick analogy for why this trade deficit with a specific country is not something we should necessarily worry about. So I don't know a whole lot about trade with China. I had some Chinese students at one point in time. I haven't since 2020 for various reasons. For some reason, it seems like the political system was not as happy with trade partnerships or with educational partnerships after that point in time with that country. But in any case, I wanna focus on a smaller scale that I am more familiar with. And that is the relationship I have with my local grocery store. I have four children they like to eat. The diversity of things which they eat is very small. So I buy lots and lots of cottage cheese and pickles. These are not things I produce myself, but I go to the grocery store and I buy them. So if you look at the trade balance between the Englehart household and the local giant eagle, you're going to find that we have a significant trade deficit from the fact that we go to the grocery store two, maybe three times a week to replenish our milk supplies and the like. So is this a problem? I'm importing all of this food from abroad that is from the grocery store. Meanwhile, I'm exporting nothing to the grocery store. It turns out I don't actually want to work as a cashier for them and they don't want to buy economics lectures from me. So I have nothing to export to them. So is this a problem? Well, I submit it's not a problem for two reasons. One being I have a trade surplus with Kent State University. I am selling my services to them. At this point, my kids are young enough that I'm not going to be paying tuition to Kent State for them. So I buy almost nothing from Kent State University. So money coming in on one side it's going out the other way. I'm not in danger of bankruptcy because I'm buying food. That's not a problem. So we have these surpluses on the one hand balancing out deficits on the other. But more fundamentally, it's not a problem because the reason that I go to the grocery store and buy food is that I feel better off when I do that. I am perfectly happy and in fact prefer taking my money and giving it to the grocery store so that they will in turn give me food. They are also perfectly happy to give me that food in exchange for my money. So even ignoring all the surplus that I get from Kent State University, this particular deficit by itself is not a problem. It's just the result of the fact that I would rather I'd have a good while the store would rather have money. So it turns out the same argument is one that we can apply when we go to the second type of argument related to the balance of trade. And that is looking at the general balance of trade. So it's not just that we have deficits with China. It's that if you add everything up that the United States as an example it has significant trade deficits with the rest of the world all combined. So when it adds up to a negative number, is this a problem? I think Ludwig von Mises had a really good answer to this. And what he does, he kind of flips the script a bit and he says, what's happening if you have a trade deficit with the rest of the world? Well, you are actually exporting something. Well, you're exporting his money. You're sending money to the rest of the world in exchange for goods. So here's a quote from Human Action. This is what he says. He says, an excess in the exports of money is not the product of an unhappy concatenation of circumstances that befalls a nation like an act of God. It is the result of the fact that the residents of the country concerned are intent upon reducing the amount of money held and upon buying goods instead. But another way, the reason we have these significant trade deficits in the United States is that Americans have decided we have more money than we'd like to hold. So we send that money abroad and we get goods instead. And we're perfectly happy with this and there are apparently plenty of foreigners that are perfectly happy to accept dollars in exchange for their goods. So this is in fact just an expression of our preferences and satisfying those preferences. But now another point about this that we can draw from Mises is he talks about the fact that this is something that would naturally tend to self-correct in most cases. After all, if I have more money than I want right now and I go out and I spend the excess, well then I have as much money as I want. I'm gonna stop doing that. And that is what we would typically find that trade deficits tend in most places to be temporary. But then we look at the United States for the past 50 years. We have trade deficits that started out by the end of the 1970s, something in the neighborhood of 1% of GDP. Nowadays something in the neighborhood of 4% to 5% of GDP. These very large trade deficits that have not gone away, they have not proven to be temporary. So how is this possible? Again, Mises tells us, he says the exception, is if you have a country that's producing money. If you have a country that's continuously producing money, we continuously have more money than we want to hold. So we just keep exporting it. And we can therefore have trade deficits continuously. And the United States happens to be in the position where we are continuously producing money. Well, those are good ideas that matter for a different lecture, right? But that is the truth, right? We are continuously producing money that the rest of the world is content to hold. So we send it to them and they give us goods. All right, so I think that's a fair answer to this balance of trade concern, that I don't think I'm really that worried about the U.S. running out of money, right? And this also helps to explain certain phenomena that have been puzzling over the past several years. People were very confused in 2020 with the fact that suddenly our trade deficits exploded. Well, if we take this perspective, it's not shocking at all, right? What happened in the United States? We printed enormous sums of money. We sent checks to people, right? So it's not just that there's a lot of money in the banking system, but people actually are being sent literal money, right? And then we tell people they're not allowed to produce as much as before. We're shutting stuff down, so shutting in various sectors of the economy. I have a bunch of money to buy stuff. I still like to buy stuff. We can't produce it in the U.S. What do we have to do? We send the money abroad and we import from abroad. So it's not that surprising that this happened once we take the necessity and understanding of how this would work, okay? So that's the first argument, this balance of trade concern, not really, I suspect, actually a concern, nor should it be. The second type of argument you tend to see is trying to protect, right? Domestic industry is domestic labor. Now, what the emphasis of this is seems to vary depending on which political party is talking about this form of protection, right? So on the one hand, those that generally lean further to right, you'll hear, oh, we need to protect the businesses. We need to protect the steel producers, that kind of thing. On the opposite side, you have people like Senator Bernie Sanders, right? Who continuously are used against free trade, specifically on the basis that American workers shouldn't have to compete with workers in other countries that can earn less, right? So we want to protect the workers from this foreign competition, okay? So let's go ahead and answer this objection. I mentioned before that there's very little original here. That's, I'm just gonna quote Mises a lot. He dealt with a lot of this stuff, right? So what does Mises tell us? Well, he points out that tariffs and other forms of trade restrictions and quote-as-in-the-like that protect domestic workers or domestic companies from foreign competition are going to raise the cost to consumers, which are obviously harmed, right? You either then have the choice, if you were somebody who bought, let's say, steel when the steel tariff came in place, you have the choice of either continuing to buy foreign steel but paying a tax on top of it, the tariff, or switching and now buying domestic steel that's more expensive, right? So as a consumer, you're obviously made worse off. You have to pay more to get the same thing, or perhaps to get something worse, right? Alternatively, you can just decide not to buy the thing and then you don't have it anymore, right? Either way, you're clearly made worse off. So all we're really doing when we put in place these trade restrictions is creating sets of winners and losers within the economy, right? Those being protected, the industries, the workers, gaining, and then those that would consume this good being made worse off. Now sometimes those that would defend these types of tariffs will say, oh no, no, but this is okay, right? Because once you buy that American good, that money recirculates in the economy. It comes back around, we're not actually going to end up having to cost anything for our economy as a whole then. Mises has a great analogy to answer this particular argument. He says, this is like the man who asks an innkeeper for a gift of $10, but assures him it won't cost him anything because he's going to spend it all at the end. Now think another step, okay, the innkeeper didn't give you $10, they just gave you $10 worth of goods, right? They're still certainly made worse off than if they hadn't just given you this gift, right? So in the same is true here, right? So yes, it may be that this money eventually circulates back around or something like that, but how does this happen? Well, if you're, say, the consumer of the good, well you have to work more to get the money to buy that good, right? Okay, that's not particularly surprising. That's what you'd have to do. We're being less efficient on the whole. We're eating into the division of labor by not allowing the more efficient workers or the more efficient companies abroad to sell to us. Once you eat into the division of labor, we become less productive, which means to get the same stuff, we have to work more, right? So we then have the choice, work more to get the same stuff or work the same and end up with less stuff, right? In both cases, we're clearly made worse off on the whole. So that is the position we're placed in that we are clearly making that group of consumers worse off even with these recirculation or what have you. So in short, the result of these types of tariffs is that some are going to gain while others lose. But that's just the short run. Other steps happen, right? So give it time on what happens. Well, let's suppose that this is actually successful in making these protected industries more profitable than would be average. Well, then what happens? So we have new competitors say, hey, I want to start a business. Turns out I see that, say, steel producers in the United States are unusually profitable, right? So I want to go out and start producing steel. So if new competitors coming into that market, they are also going to compete for the factors of production we have here, bidding up those prices and eating into those unusual profits. So give it enough time on what happens, right? Even those gains, right? Get eaten away, right, over time. And then we end up in a terrible position where now we have this protected industry that's not even unusually profitable, but yet they are dependent, they are addicted, right, to these trade protections. Because if they went away now, now we're going to end up with losses. People are going to go out of business, workers losing their jobs and actively being made worse off if we release these trade restrictions. Sounds like a problem, right? So in the end, the production of domestic industries and labor, it tends not to work. And if it does work at all, even if all we care about is the steel industry, it works very temporarily, right? And as a result is not a good idea. Now, Mises does say, well, there is a way around this. And that is if we protect, say, the steel producers, not just from foreign competition, but from also domestic competition. So we need to make it very difficult, right, to start new businesses. And that's going to then allow these unusual profits to maintain over time. I feel like that's not something we want to advocate, right? If you want to improve things for the consumer, you allow competition to happen domestically and also internationally, it turns out. The next argument, oh, I did have one more point here. That is, this idea of an optimal tariff, it's something that has come out of the economics literature over the past couple of decades, where it might be in certain cases, but you put in place a trade restriction, what that does is push down the price of whatever the good is on the world market. So then the full cost of the tariff doesn't fall on the, say, the American consumer. So say the cost of the tariff is a total of, say, $5 per unit. If we can push down the world price by a dollar, then only $4 is what's paid by the consumer, right? So the idea of the optimal tariff is that it might be that when you do all of the adding together of producer surplus and consumer surplus, then it ends up that the producers gained a bit more than the consumers lost. Now I suggest a problem with this argument is that the consumers are still worse off, we're still picking winners and losers, right? And that is exactly the problem that we have. And then add a competition onto this and even that producer surplus gets eaten away over time. All right, the next argument is really a slightly different form of this idea of protecting domestic industries and labor and that is the infant industry argument. This is America's favorite argument for protectionism historically. And it was authored by Alexander Hamilton. And what did he suggest? He said, okay, the problem we have here in colonial America in the late 1700s is that England is already developed. They have these manufacturers that can create textiles very cheaply, very efficiently. They already have huge economies of scale that are letting them sell their textiles for really low prices. On the other hand, here in America, we've not developed that much yet. But we could. We have the capability, right? We're a very productive, great people. So all we need to do is be given the chance and to give us the chance that we need is just temporary protection. And so we'll just have some tariffs in place to increase the cost of the goods from Britain so that our American industry can get off the ground. So we start out, we're not gonna be that efficient. We don't really know what we're doing. We don't have all the capital goods developed yet but give it time, we become more efficient. We'll develop those capital goods. We will get to the point where we can compete on the same basis as the British. Right, so it's just a temporary thing. Just put in place these tariffs and then we can take them away, right, once we have developed. And Mises has an answer to this argument as well. So he says, okay, backing up a bit, let's go ahead and allow that if there had been no factory built in the first place, the better place to build it would have been America. I say the resources that we have available here, natural resources, that kind of thing. We have better laborers or something along those lines that would be able to learn quickly in this industry. So let's say this would be the right place if there were no factory to start with. So we'll allow the factory was originally built in the wrong place from today's point of view. But it doesn't immediately follow that encouraging building in the right place is good economics. So now quoting him from Human Action, this is what he says. He says the truth is that the establishment of an infant industry is advantageous from the economic point of view. Only if the superiority of the new location is so momentous that it outweighs the disadvantages resulting from the abandonment of non-convertible and non-transferable capital goods invested in older established plants. But another way, the plant over in Britain is already here. Simply building a plant in the US doesn't change that fact. Now it might be, or maybe the American plant is going to be so much more productive that we should just abandon the resources in the UK. But if that's true, entrepreneurs will do that. They look and say, well, where should we build this plant? Well, we need to build in the US. Oh, we already have the plant in the UK. But it's not that good. So we just abandon it, sell it off, give whatever we can out of it, and then we build in the US. We don't need protection in that case. The only case in which we need protection is where that's not true, is where the fact that we already have the plant in the UK means that we actually should still use that capital for a while. Now it might be that we want to allow that capital to get consumed over time, and when it's time to rebuild or rebuild, say in the US, something like that, that could happen. But we don't want to push things along too quickly, or we end up just wasting the capital that we have already invested. So this would be the argument that Mises makes that in the case of the infant industry, if it's a really, really good infant industry, it doesn't need protection. If it needs protection, it must not be effective enough as an infant industry. All right, another, I guess an empirical observation, is that what we often see is that when we place tariffs in place to protect infant industries, they develop with that tariff in place. They adjust themselves to the fact that the tariff exists. Which means then, they are not prepared for the tariff to go away, which makes it extremely difficult to eliminate that tariff. So I was reading one author on this argument, and he said, what we will often see is we see an infant industry be born, then never move into maturity. It just kind of stays an infant and then becomes senile, to the point where it really should die, even with tariff protection. That's not really a good use of resources. If we're interested in human flourishing, we want a good use of resources to happen. The next argument that I want to look at is the national security argument. And this is a place where I feel like I need to tread pretty carefully. And here's why. From Mises, Human Action. The bulk of expenditure for national defense is defrayed by the treasury out of the public revenue. But occasionally, another procedure is chosen. It happens sometimes that the nation's preparedness to repel aggression depends on the existence of certain branches of industry that would be absent in the unhampered market. These industries must be subsidized. And the subsidies granted are to be considered as any other armaments expenditure. Their character remains the same if the government grants them indirectly by the imposition of an import duty, a tariff, for those products concerned. The difference is only that then the consumers are directly burdened with the costs incurred, while in the case of a government subsidy they defray these costs indirectly in paying higher taxes. Now, I may be misinterpreting, I'm not always the smartest person, but this sounds like Mises is fairly sympathetic to a national security defense of protection. Now, that may not be the best way to do it. He at least seems somewhat sympathetic, and I think we can understand why. If you came to me, I'm a pretty free trade person, and said, Engelhardt, here's the choice. We either put in place tariffs, or everybody dies. Well, I guess everybody dies. No, no, all right? No, okay, in that case, right? You found, you caught me. I guess I'm okay with tariffs in that case. And remembering the life that Mises went through. He saw World War I, he saw World War II. He saw Austria get invaded by Nazis. So I can see where he would be very sympathetic with the national security argument, and I think if we are dealing with these extreme cases where it is literally true that the survival of the nation is at stake, then I think you can make a fairly good argument for a national security case for things like tariffs. But I still nonetheless want to push back a little bit. Can't push back too hard against Mises. But I'll push back a bit, and so I'm gonna make a few arguments as to why we should at least be very cautious about accepting the national security argument in any particular case. So the first argument that I want to make, which I think is relatively the weakest, so that's where I'm gonna start, is we first need to consider, is it true that say a protectionist tariff or something like that is really the best option in this case? Or might there be other ways that are going to be more effective, that are going to be better? And Mises himself kind of offers this, he says, well, you might have to subsidize it, or you might possibly put in place tariffs or some kind of import duty to protect the industry. So this is kind of a technocratic point. Like is it really true that tariffs are the best way? Maybe a subsidy is better, maybe stockpiling the good is another option that might be better. Stockpiles are one, I think about this one, it reminds me of when I was fairly young, I was probably in late middle school, high school, I was interested in politics. And at that point in time, I was concerned about American dependency on foreign oil. And this happens like every three or four years. It doesn't tell you what my age is at all. So this time there's a lot of concern over dependent on foreign oil. I absorbed this then from the media, that oh, what are we going to do about our dependency on foreign oil? So I was talking with my dad about it. And he said, well, I'd rather use theirs than ours. And like immediately I did that, hmm, okay, that's a good point. Like yes, in fact, in the case that a war comes, I would rather have used up all of the Saudis oil, so we still have it under the ground here, so then we're better prepared, right? So in this case, in some cases, things like non-renewable resources, these natural resources, in that case, national security might actually be an argument for importing, rather than against importing. We should be stockpiling things as cheaply as we can. That is then depriving our potential enemies of these goods and making sure that we have them. Which is kind of an interesting point, would be at a point, in some cases, against having trade restrictions. And so I think that's one point we can make, is it true that a trade restriction is really the best option in defending our national security? The second argument I want to make, I'm going to name the slippery slope argument. Now, I'm calling it the slippery slope argument because I know if I don't, someone out there in social media world is going to say, that's a slippery slope argument, right? So you defend yourself, I'm going to call it that. But it turns out some slopes are slippery. And again, you can make slippery slope arguments as long as the slope is actually slippery. And I suggest that if we understand Austrian capital theory as presented by Dr. Rittenauer, and then also summarized by Dr. Newman, we can see where there's going to be some slippage in the argument, right? So suppose we decide that flourless chocolate cake is essential to national security. Who put Dr. Rittenauer in charge of the DHS? I don't know. But suppose we make that decision. Okay, so we want to make sure we have flourless chocolate cake factories here in the US. So we put in place tariffs on foreign flourless chocolate cake. But we know that we would then also want to make sure that we can have the chocolate, the butter, the eggs, the springform pans, the ovens, the kitchens, and so on. So do we also then have to have protections on all of these goods to make sure we can continue producing flourless chocolate cake in the event of a war? You can make a good case, right? Of course, if we want to make sure that we have the eggs, the butter, the flourless chocolate cakes, well, yes, I already said that, the springform pans, the ovens, and so on. Well, then we want to make sure those industries are protected, right? And then we end up with that whole conspiracy map that Dr. Newman showed us, everything is connected, right? Kent State, economics is in the business school. I like to say we're kind of the hippies of the business program. Everything's connected, man. So everything is connected in the economy. We understand that if we understand Austrian capital theory. So then the question becomes, well, where do we draw this line? At what point does it stop being about national security? It seems like we could draw a line probably around virtually everything and have it be about national security. Now, take out flourless chocolate cake, put in something like tanks and you still have the same problem. Even, it's a better starting point perhaps, right? All right, so I went looking to say, is this actually really a problem? Have we slipped down this slope at all? Well, it turns out that the American government and various bureaus has established a number of lists, right? Of things that it considers critical to national security. Right, so I found several of these lists. The first list that I found was 18 broad areas of critical and emerging technologies that are important for us to have in the event of national security. Now, I say 18, 18 is kind of a misnomer, I guess a misnumber. And that each of these has subcategories, right? So for example, one of those categories was advanced computing. So advanced computing technology is one broad of those 18 categories. But within that, we have things like supercomputers, cloud computing, data storage, and so on. Again, one of those big categories be something like financial technologies. Underneath that, we have things like distributed ledgers. Distributed ledgers are essential to national security. I think that's interesting. And then like semiconductors, right? So we have all these subcategories as well. So understand the 18 number. These are really broad categories. So I went looking, I thought, okay, well, but I don't see anything on here like steel, right? All the manufacturing stuff is like advanced manufacturing, which is steel. I don't know if it's that advanced anymore. We can produce it fairly well. We've been doing this for quite a while. So I kept looking. Then I found another list, right? This one was compiled by the US Geological Survey of 50 critical minerals that they have identified that are essential to national security. The list there ranged from aluminum to zirconium. It's a pretty big list, lots of different things that many of which I recognized, many of which I didn't, nonetheless, are essential to our national security. Okay, well, that also can't be all because after all, we need to eat, right? And I'm not finding anything about agriculture on these lists, so I kept looking. The Department of Homeland Security has a list of 54 critical functions that have to be fulfilled within society. This includes things like providing water and providing communications, providing food and the like. So we need to make sure all of these things happen for our national security to be what it should be. Then I kept looking. I found another list from the International Trade Administration and they identify, are you ready? You're not ready. 2,409 supply chains that are essential to American national security. Is the slope slippery? Maybe, maybe so. Now I'm gonna push back on my own argument, though. So how much have we slipped on this slope? We've identified a potentially very slippery slope. We have 2,409 supply chains we might possibly want to protect for national security reasons. Well, do we actually do that, right, though? Well, it turns out the American President has some leeway when it comes to national security with implementing tariffs. So we've seen this done. I'm President Trump famously did this with steel and aluminum, right? So how often do we actually try to use national security as an argument? Using these types of lists. Well, it turns out if you look under the past administration, so under Biden and then previously President Trump, there have been a total of just eight investigations into using these types of justifications. Those eight, I have the list just in case you wanna know. The most recent was neodymium iron boron magnets. I think they have some technological use that I'm not totally aware of. And that one, I was looking at this report and they actually came to the conclusion that it was not a good idea to have tariffs on this. Stockpiling was a better strategy. Another one that they've looked at is vanadium, which is essential in steel and titanium alloys that are used I think for aerospace applications and military applications. Then laminations for stacked cores which are used in electrical transformers, titanium sponge, which I think is just a form of titanium. Don't think you're cleaning kitchens with the titanium sponge. Uranium, okay, fairly obviously. Automobiles and automobile parts and then steel and aluminum back in 2018. So, it seems like only eight times. Have we actually appealed to this particular argument using this particular method? Now we do have some cases like the CHIPS Act where there was a national security argument made for this, so that's more on export restrictions, it turns out. With that being the case, it seems like there's some awareness that even though the national security argument might possibly be the strongest theoretical argument for allowing some kind of trade restrictions, given the choice between trade restrictions and death, we do in fact choose trade restrictions. Nonetheless, in practice, it seems to not be that relevant much of the time. I think it's true that we're actually aware of this and not just we're aware of this, but even those in power seem to be aware of this. We don't use these arguments very often. So, I went and looked at the details of the steel tariffs in 2018. So, at that point in time, the Trump administration did come down on the side of, yes, we need tariffs to protect the American steel industry because it's important to national security. At the same time as it was under the Department of Commerce, it's the Bureau of Industry and Security that does these reports. So, it released this report in favor of tariffs. Ryan McMacon pointed out on Mises Weyer who was shortly after that the Department of Defense, who was of course devoted to peace, said, no, we don't actually need these. When you look at how much steel that we actually need to defend the country, it's like 3% of domestic production. It's so little that we don't need to protect from foreign steel for national security purposes. So, even in the cases where we actually see this used as a defense, it's not even unanimous within the government. And in fact, the Department of Defense itself says, we don't really need this protection, which I'm not gonna say we should trust the Department of Defense, but if they say they don't need something, I'm gonna believe that at the very least. And it was also interesting looking at the detail of the report that came out of the BIS about this. And that when you look at the number of pages they devote to different arguments, they devoted a total of four pages to the argument that steel is essential to national security. They devoted 28 pages to the idea that imports are hurting our steel industry. So they made primarily an economic argument rather than a security argument, which I think is interesting, given that they wanted to go the security route in defending this. So I wanna make then one more argument as to why we should be cautious about these national defense arguments for protection. And that is relating back to the third point for free trade that I said. We know that allowing trade to happen binds people's well-being together. So what happens when we don't allow free trade to happen? We start breaking apart the division of labor and start isolating countries from one another. Well, it turns out that conflict breeds conflict. And this is in fact something that we do actually observe. There was a study done by Patrick McDonald. I don't really know anything about this person except they had a useful study for my point. And they published this in 2004 in the Journal of Conflict Resolution. Well, the title of the paper was peace through trade or free trade. And what they did, they looked at 40 years of data and looking at pairs of countries, look at the amount of trade that happened and also what types of trade protections there were, so like levels of tariffs, import quotas and the like to try to classify how protectionist is this particular pair of countries against each other and then how much do they trade with each other? And then looked at how much armed conflict we saw between these different pairs of countries. And what they found was that if you looked at those countries that had very little trade with each other, we're saying the bottom 10%, and compared them to the top 10% in terms of actual trade happening, the amount of armed conflict that you saw between the countries going from the bottom to the top of that list, the level of conflict fell by 2.4%. So the more we trade with each other, the less armed conflict we see. But 2.4% doesn't sound very big. It feels extremely small. So what was going on? Well, the other thing they looked at was the level of free trade. So they said, if you compare them to the 10% most protectionist pairings with the 10% most free pairings, you do again see a big decrease in conflict as you go less protectionist by 70%. Okay, so what was it that led to peace? It was this attitude of free trade toward one another that seemed to be what decreased conflict. So if you're interested in having peaceful relationships between different countries, we should be interested in having free trade relationships between countries. Even if it doesn't result in much trade happening, having that relationship built on cooperation and the willingness to cooperate is enough to eliminate this conflictual relationship, which is inherent, built into any type of protectionist attitudes. So I think I'm going to end there. Just the final point is that if we are interested in prosperity and peace, we should be interested in free trade. If you're interested in decline and destruction, protectionism is for you.