🌊 Roca Exclusive: America's Lone Pro-Tariff Economist

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By Max Towey

Glancing at his bio, Jeff Ferry doesn’t sound like someone who would support tariffs. He’s a native New Yorker who studied economics at Harvard and then the London School of Economics – two institutions where protectionism (an economic philosophy that supports tariffs) is taken about as seriously as creationism would be at their respective divinity schools. But today he’s one of the only economists in America who supports tariffs.

I recently saw him in a private debate that Bloomberg hosted, where he went toe-to-toe with Harvard University’s Jason Furman, the former chair of President Obama’s Council of Economic Advisers. Jason Furman is the avatar of modern economic thought: He loathes tariffs, loves globalization, and advocates for a more technocratic government. 

Ferry, however, believes that Furman, like most economists, is deeply misled. Ferry argues that economics took a turn in the 1930s and that economists operate like a cartel today. If you don’t buy their ideas wholesale, Ferry argues, they won’t give you a spot in a good PhD program, a job at a respected think tank, or a position in government. 

Ferry, a former tech executive and most recently the chief economist at the Center for a Prosperous America (CPA), seems to embrace his role as a heretic. He knows he’s alone, and it’s won him fanfare in the current administration which will tout his work as evidence of economic soundness.

To understand his viewpoint, I sat down with him for a conversation.

Max T: There’s a perception that no serious economists support tariffs, almost like scientists opposing climate change. Is that characterization accurate, and how does it feel being seemingly the lone economist supporting tariffs?

Jeff Ferry: It’s very lonely, I’ll tell you that. People make fun of me and dismiss my views all the time. What you say is right – 99% of economists in the United States and United Kingdom are opposed to tariffs and believe in the classical pure free trade doctrine. That’s not true outside those two countries. The Asian Tigers – South Korea, Taiwan, Hong Kong, Singapore – have had outstanding economic records over the last 50 years, better than the US, and all of them control imports and run trade surpluses. Outside the Anglo-Saxon world, managing trade is seen as an important part of a growth strategy. In the US and UK, economists found free trade a great way to gain influence over policy about 90 years ago, claiming objectivity against businessmen’s special interests. They use mathematics, like comparative advantage, which most politicians can’t follow, so they give up. I’ve written articles on the CPA website about what’s wrong with comparative advantage theory—it’s right under certain assumptions, but those don’t exist in the real world.

Max T: Can you give an example of why comparative advantage doesn’t hold up today?

Editor’s note: Comparative advantage is the theory that economies have specific advantages and use those advantages to produce what they are best at and trade it with the world.

Jeff: In David Ricardo’s mind, when he wrote his book on comparative advantage in 1817 – I’ve got it on my bookshelf – he imagined a world where all countries pay the same wages. His classic example is England and Portugal making wool and wine. England has a natural advantage in wool because its climate suits sheep, Portugal in wine because it’s sunnier. So, Portugal makes wine, England makes wool, they trade, and it works because everyone’s making about 10 shillings a week, a subsistence wage. But if English workers make 100 shillings a week and Portuguese workers make 10, it’s cheaper to make both in Portugal. Ricardo mentions this in his book, saying if wages differ, both products would be made in the lower-wage country, but companies wouldn’t move because they wouldn’t trust foreign legal systems. As a former stockbroker, he knew this was true in 1817. But in the 1990s, during globalization, wage differences were huge – today US manufacturing workers earn $35 an hour, Mexican and Chinese workers $4. For American workers to compete, their wages have to come down, or jobs move to Mexico and China. Companies don’t cut wages outright; they move production, saying, “We’ll keep your wages at $30 an hour, but we’re moving a third of production to Mexico, a third to China.” This leads to job losses, creating economic deserts in communities, far outweighing Ricardo’s small efficiency gains.

Max T: Jason Furman argued it’s good that we pay workers $35 an hour while others pay $4, because our workers are more productive due to our superior technology and education, which allow us to build software while others make phone parts. What’s your response to the idea that we do smart jobs here and outsource cheap, easy stuff?

Editor’s Note

Thanks for reading. We found this interesting, we hope you did too. If you have thoughts, let us know and we’ll feature replies tomorrow. If not, see you then.

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