In my post earlier today, I wrote about how tariffs affect the value of different resources. I promised a follow up post on attempting to determine whose value should take precedent, the producer’s or the consumer’s. This is that post.
Tariffs increase the value of the producer’s property while deceasing the value of the consumer’s property. All actions have this sort of mirror effect: when I choose to buy my groceries at Giant as opposed to Safeway, the value of Giant’s supplies marginally increased by the $X I spent there and the value of Safeway’s supplies fell. This is simply the nature of living in a world with scarce resources. So, how can these conflicts be resolved? Simply by the assignment of property rights. By determining how property rights are allocated and assigned, then conflicts can be avoided.
For most of our commercial society (that is, the aspect of our interactions concerning commercial activity), property rights of income are generally assigned to the consumer. No producer can compel any consumer to purchase his goods/services. In fact, compelling the purchase of goods and services is illegal. Further, producers cannot require all other producers in an area to sell at a given price (again, that is also illegal). This rather simple examination of property rights tells us that, generally speaking, the consumer is sovereign. Property rights of income, we can say, are assigned to the consumer.
Bringing this back to our conversation in the previous post, who has the proper property claim right? The producer whose goods are lowered in value pre-tariff or the consumer whose value is lowered in value post-tariff? I think, judging by the above analysis of property rights, the claim rightfully belongs to the consumer. Therefore, the tariff, insofar as it is currently constructed (a tax on the buyer, not seller) is a violation of those property rights. The value of the consumer is protected and the producer must find some other way (other than tariff) to seek redress. He has no legal claim to the consumer’s income stemming from competition.* I argue that the existing property rights regime requires tariffs be rejected, and the implementation of such is a violation of the property rights regime, thus weakening both property rights and the rule of law.
A larger point I want to make in conclusion: the assignment of property rights, and more importantly their consistent enforcement, will go far in reducing or eliminating conflicts that will arise simply from the fact of scarcity. Without property rights, economic well-being cannot be enhanced.
*I can even cite legal precedence, see “Illinois Transportation Trade Association v City of Chicago”, where the judge ruled: ““Property” does not include a right to be free from competition. A license to operate a coffee shop doesn’t authorize the licensee to enjoin a tea shop from opening. When property consists of a license to operate in a market in a particular way, it does not carry with it a right to be free from competition in that market.”*