The standard economic argument against tariffs is that, by eliminating foreign competition, they simply raise prices for consumers. While true, this argument barely scratches the surface of the problem and overlooks a critical reality: tariffs and protectionist policies do far more than just raise prices—they block the entrepreneurial discovery process that is essential for progress.
The problem with this perspective is that it is rooted in a static view of competition, drawn from mainstream economic models of perfect competition. This model defines competition as a market with numerous producers selling homogeneous goods, where none have any influence over price. Firms are seen as mere price takers, responding to market conditions rather than actively shaping them. In this framework, barriers to entry are assumed to only raise prices—either by reducing supply or increasing production costs—without fundamentally altering market dynamics.
However, this is a deeply flawed understanding of competition because it assumes perfect information—that all market participants already possess complete knowledge of prices, products, and opportunities. By assuming that all relevant knowledge is already known, this framework eliminates the very need for entrepreneurial discovery—the process through which individuals notice and act on gaps in the market, introducing innovations that drive progress………
Tariffs, in this sense, are domestic sanctions—self-imposed barriers that block the flow of knowledge, stifle entrepreneurship, and sabotage economic progress. They stem from the same autarkic mindset that has kept Iran economically stagnant despite its natural wealth.
If we fully understand the significance of the entrepreneurial function, we will realize that suppressing it is a tragedy which means gaps will remain unnoticed and needs will remain unmet. Every restriction on trade and competition is a restriction on the human process of discovery—the process that has lifted societies out of poverty and created unprecedented prosperity where it was allowed to flourish.
If you get in the way of the entrepreneurs doing their price and efficiency discovery process, you partially destroy the free market and its efficiencies. So, by making the tariffs, they get in the way of the market as is the usual outcome when the state interferes with market processes. They don’t work as well or at all and all of the consumers suffer their desires not being met. I other words, the politicians and bureaucrats are saying they are the experts, you are the plebes and because we know all, you should do what we say not as we do! Technocracy at its very best, isn’t it?