at stake in it, and, in the second place, the state would bear the loss, while it lasted, but private interests would take the gain after it began.
(B) That Protective Taxes do not Raise Prices but Lower Prices.
111. To this it is obvious to reply: what good can they then do toward the end proposed? Still it is true that, under circumstances, protective taxes do lower prices. The protectionist takes an infant industry in hand and proposes to rear it by putting on taxes to ward off competition, and by giving it more profits than the world's market price would give. This raises the price. But the consumer then raises a complaint. The protectionist turns to him and promises that by and by there will be "overproduction," and prices will fall. This arrives in due time, for every protected industry is organized as a more or less limited monopoly, and a monopoly which has overproduced its market, at the price which it wants, is the weakest industry possible (§ 24). The consumer now wins, but a wail from the cradle calls the protectionist back to the infant industry, which is in convulsions from "overproduction." Some of the infants die. This gives a new chance to the others. They combine for more effective monopoly, put the prices up again by limiting production, and go on until "overproduction" produces a new collapse. This is another reason why infants never win vitality. The net result is that the market is in constant alternations of stringency and laxity, and nothing at all is gained.
112. Whenever we talk of prices it should be noticed that our statements involve money — the rate at which goods exchange for money. If then we want to raise prices, we must restrict the supply of goods, so that on the doctrine of money also we shall come to the same result as before, that protective taxes lessen production and diminish wealth.
