Tax Britannica: Nineteenth Century Tariffs and British National Income∗

The literature on British economic history presumes that Britain was a free trader after the repeal of the Corn Laws and that her tariff levels were thus below those which were optimal for maximizing utility. Presumably, if the optimal British tariff had been positive and greater than the levels established by mid-century, a reduction to zero of all tariffs that remained would have lowered British welfare even further. In this paper, we use a simple computable general equilibrium model to simulate a drop in all British tariffs to zero. The resulting substantial net increase in British welfare suggests that British tariffs were much higher than would be consistent with an optimum tariff policy. More important, the size of British losses from her high tariff levels suggests that British policy was not consistent with the stance of an ideological free trader. ∗Special thanks to Jean Mercenier (Monsieur GAMS) for his invaluable help. We also wish to thank Sam Addy, David Bullock, Avner Greif, Deirdre McCloskey, Maria Crawford, Joel Mokyr, Erik O’Donoghue, Paul Pecorino, Akram Temimi, Dean Williamson, and an anonymous referee for very helpful comments.