The Optimal Tariff

A tariff is a species of tonlieu. It is a fee collected by the sovereign of a territory in exchange for the privilege of transacting business within his domains. Some markets are more rewarding to merchants than others, either because of their prosperity or their lawfulness or their just laws – or all three, for prosperity is correlated to lawfulness and just laws. The more rewarding a market, the more a merchant ought to be willing to pay to play in it, and the higher its tariffs should be.

A sovereign interested in maximizing the net present value of his revenues, then – as all sovereigns ought to be (and are, whether they admit to it or not) – would do what he could to ensure that his laws were just, and that his subjects were lawful and prosperous.

Even when they truly serve the common good, laws can be unjust on account of their inefficiency – of, e.g., their complexity, incoherence, difficulty of administration, cost of compliance, and so forth. So the sagacious sovereign would try to make his laws simple, easy to understand, consistent, and easy to follow. This would generally mean keeping them few, and minimally invasive.

But how then should he decide the proper tariff? By increasing his tariffs on all merchants until he sees the increase in revenues generated by the marginal increase in tariffs going to zero. This would subject the most successful enterprises in his domain to appropriate foreign competition, while preventing it from cutting the legs out from under the most vulnerable of his subjects.

Likewise for tolls on visas, another form of tonlieu. These too ought to be set as high as can be without reducing their increase of sovereign revenues to zero. They ought furthermore to be strictly limited as to duration. Renew your visa as you like, but plan on paying just as much to renew your visa as you paid to get it in the first place a month ago.

As for tolls and tariffs, so a fortiori for the price of citizenship.

It ought in justice to be more expensive to get into America than anywhere else in the world.

20 thoughts on “The Optimal Tariff

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  3. Thanks for this blog post regarding the optimal tariff; I really enjoyed it and am definitely recommending this blog to my friends and family. I’m a 15 year old with a blog on finance and economics at, and would really appreciate it if you could read and comment on some of my articles, and perhaps follow, reblog and share some of my posts on social media. Thanks again for this fantastic post.

  4. To be clear, are you saying that sovereigns ought to be profit maximizers or simply making the lesser claim that they should be “interested” in maximizing the npv of their revenues?

    • The latter. Like anyone, a sovereign will have many interests. NB also that revenue is not profit. The sagacious sovereign is interested in (among other things) maximizing NPV of the former, the better to serve his various interests. There may be no profit, net of that service.

    • I take it that you mean to ask whether there is a minimum price for entry of goods or people to a territory. Yes. It is zero. This for entry to a territory with no sovereign, no law, no surety at all. There is no one in such places to collect tonlieux of any sort, or offer any benefits in exchange. Such territories are not domains, but wildernesses, no matter how thick their human population. No one can ever own anything in such places, except by exertion of personal force. Nor therefore, obviously, can trade much happen. So anyone who can assert ownership of such lands by violence can take them as his own property, and become their sovereign. Only then can commerce or industry have a shot at beginning.

      Does that answer the question?

      • Ownership can not be asserted by violence. It is a self-contradiction.
        Ownership implies a moral right and moral rights arise out of the logic of the situation. For instance, I have worked in crafting something, so I own that thing. Violence does not confer any moral right for if I have succeeded in occupying a territory or possessing a thing by force, other people, with no violation of my rights, may take my possession by force,. For those that live by the sword will die by the sword.

      • Property is a social agreement, to be sure. Absent that agreement of the polis to the propriety of ownership there is only theft, tyranny, pillage.

        But social agreement about property can break down. One of the social functions of the sovereign is to adjudicate such disputes, and to enforce rights under such agreements, whether formalized or not.

        In the absence of sovereign rule over a domain ownership can be asserted or denied by anyone, with nothing to prevent a descent into violent conflict over any disagreement on the matter other than the good sense and prudence of those involved. And where the justice or competence of a sovereignty – and thus the propriety of its rule – has come under question, it is in fact generally questioned by someone or other. Merely to raise this question is to open the door to violence, to war. The question may of course be settled quite amicably, and often is. But until it is, violence is more likely than usual. For, violence is one way to settle the question of who is more competent to rule, and thus who is more properly the ruler; so men hate the uncertainty and peril of an interregnum.

        The question is never quite fully settled however, nor sovereignty quite completely accomplished (or social peace achieved), until an agreement of fealty has been reached. The sovereign must pledge himself to his people, and they to him. This is why there are rites of investiture, coronation, inauguration, and so forth, involving sacred oaths. Until this has occurred, and worked its way into men’s hearts, the territory under the sway of an ostensible sovereign remains a lawless wilderness. This is a terrible state of affairs, and people hate it. They long for a just king.

      • “Property is a social agreement,”
        But not an arbitrary social agreement, it is important to emphasize.
        The moral authority conferred by ownership is rational and thus is capable of being justified by a series of arguments (the kind of arguments made in law courts where property claims are adjudicated), the ultimate moral premise behind these series of arguments is that the man must eat of his sweat.

        Sovereign is essential to define the fullness of ownership i.e. ownership in land. Ownership in other things exists in the Lockean “state of nature” or in other words the frontier between two sovereignities.
        PS Lockean “state of nature” is NOT the same as Hobbesean “state of nature”.
        For :Locke, there are “state of law i.e Polis, “state of nature” i.e Frontier and state of war. (which is Hobbes “state of nature”.

      • “Property is a social agreement,”

        But not an arbitrary social agreement, it is important to emphasize.

        Of course not! I’m not sure how an agreement, properly so called, could possibly be arbitrary.

  5. Kristor,
    a comment of mine seems to have not passed moderation or eaten up in the system somewhere.
    Anyway, I am trying to post again.
    “A sovereign interested in maximizing the net present value of his revenues, then – as all sovereigns ought to be (and are, whether they admit to it or not)”

    Under which political theory, do you derive or postulate such a requirement on sovereigns?
    And if you say that “they are, whether they admit it or not” \, then of course, the USA govt IS maximizing the NPV.
    Indeed, the NPV can be easily maximized by the sovereign confiscating all the private properties that lie within his domain. For the NPV is defined as being in the present tense.
    You will get a wise sovereign if he is concerned not with the present revenue but with long-term future revenue stream.

    Anway, this is far from my actual views on the soverigns. I view the State as the agency entrusted with long-term survival and flourishing of the Community.
    And not as an agency concerned with maximizing its own revenue.

    • NPV is the present value of future cash flows – in this case, revenues – discounted by a suitable interest rate. NPV is thus a measure, not of the amount that is to be earned in revenues in the present period, but of all future revenues as far into the future as the eye can see. Maximizing NPV then is a handy accounting proxy for whether one has taken good care that a revenue generating resource should remain healthy and generate strong revenues year over year far into the future. The way to max NPV is *not* to kill and eat the goose that lays the golden eggs, but on the contrary to take every precaution to keep her in the pink of health.

      Maximizing NPV of state revenues is achieved by maximizing long term survival and flourishing of the Community.

      I don’t suggest this measure on the basis of any particular political theory. Any politician or political scientist who has discovered a good way – a just and righteous way – to promote long term survival and flourishing of the Community will ipso facto have discovered a way to maximize NPV of state revenues.

      Nothing says that the sovereign who thus maximizes his revenues must keep them for himself. He may distribute them back to his subjects. A sagacious sovereign will distribute them back in such a way as to promote long-term survival and flourishing of the Community. A foolish sovereign will behave more foolishly, as our rulers now do, and squander state revenues stupidly.

      And if you say that “they are, whether they admit it or not,” then of course, the US government IS maximizing the NPV.

      But what I said was that they are *interested* in maximizing NPV of revenues. Not that they are actually maximizing NPV of revenues. I have no doubt that our rulers would like to maximize NPV of revenues their ilk can farm off of us. It’s just that they are *really lousy stewards,* and they do a terrible job of it. So they are *not* maximizing NPV. If they could just focus like a laser on doing so, we’d all be a lot better off.

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