In economics, the Metzler paradox (named after the American economist Lloyd Metzler) is the theoretical possibility that the imposition of a tariff on imports may reduce the relative internal price of that good. It was proposed by Lloyd Metzler in 1949 upon examination of tariffs within the Heckscher–Ohlin model. The paradox has roughly the same status as immiserizing growth and a transfer that makes the recipient worse off.
The strange result could occur if the exporting country's offer curve is very inelastic. In this case, the tariff lowers the duty-free cost of the price of the import by such a great degree that the effect of the improvement of the tariff-imposing countries' terms of trade on relative prices exceeds the amount of the tariff. Such a tariff would not protect the industry competing with the imported goods.
It is deemed to be unlikely in practice.
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Famous quotes containing the word paradox:
“The conclusion suggested by these arguments might be called the paradox of theorizing. It asserts that if the terms and the general principles of a scientific theory serve their purpose, i. e., if they establish the definite connections among observable phenomena, then they can be dispensed with since any chain of laws and interpretive statements establishing such a connection should then be replaceable by a law which directly links observational antecedents to observational consequents.”
—C.G. (Carl Gustav)