Tuesday, October 25, 2011

Analogy for tariffs

The Qin dynasty was the first empire to unite all of China, though it only lasted fourteen years.  But in those fourteen years the Qin administrative system sought to standardize everything; including how areas were ruled, how weights were measured, coinage, and the size of cart axles—this last item I believe provides an excellent analogy to international tariffs.

The length of cart axles differed across states, and this is important because a cart may not be able to be pulled on a road whose ruts were carved by an axle of smaller or larger length.  This meant that if goods were exported from one state to another, as you approached the border of the new state you had to unload your goods from one cart and load them onto a different cart whose axle-length corresponded to the country you just entered.  As you can imagine, this increased the cost of exporting and importing goods considerably, and did so without changing the quality of the good being traded.

A tariff does the same thing.  It makes it more expensive to trade the good while not enhancing the good's quality.  Now, all of us can imagine the wealth resulting from standardizing axle lengths, as goods can now be traded with more ease.  However, the non-economist has trouble understanding the wealth generated from eliminating a tariff—but they are the same thing, conceptually!

And that is what makes the axle-length issue in ancient China such a great analogy for metaphors.

Kenneth J. Hammond
From Yao to Mao: 5000 Years of Chinese History
Lecture Six: The Hundred Schools
The Teaching Company

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