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Thursday, January 2, 2014

Dumb Laws- Episode 1: Merchant Marine Act of 1920

This law requires that only US-flagged ships may transport cargo between US ports. This means that a foreign ship from Hong Kong cannot stop in Honolulu to pick up cargo bound for Seattle. Instead, once it stops in Honolulu, the cargo bound for Seattle must transferred to a US ship.

This law is merely the broken window fallacy applied to sea trade. If the goal is to protect the jobs of sailors and longshoremen, why not ban cranes, forklifts, and diesel engines? A sailing ship requires a far bigger crew than a modern ship and many more would be needed to carry the same amount of cargo.

There is no net benefit to doing things less efficiently. Doing things more efficiently is what makes progress possible, because it allows resources that were used on one thing to be used for something else. Agriculture freed up people to be craftsmen, warriors, thinkers, etc instead of just hunter-gatherers.

Bastiat wrote that laws like the above act like a negative railroad. A railroad makes it more profitable for the countries connected by it to trade. A negative railroad like tariffs, regulations, etc makes it less profitable for two countries to trade. If you build a railroad, you can cancel out the benefits of it by just passing enough tariffs and regulations.

Will politicians and their supporters ever learn to stop building negative railroads?

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