Note 590 — Chapter IV · : FRIEDRICH LIST AND THE NATIONAL SYSTEM OF POLITICAL ECONOMY

“Everyone knows,” says he (quoted by Hirst, pp. 231 et seq.), “that the cost of production of a manufactured good depends very largely upon the quantity produced—that is, upon the operation of the law of increasing returns. This law exercises considerable influence upon the rise and fall of manufacturing power.… An English manufacturer producing for the home market has a regular sale of 10,000 yards at 6 dollars a yard.… His expenses being thus guaranteed by his sales in the home market, the cost of producing a further quantity of 10,000 yards for the foreign market will be considerably reduced and would yield him a profit even were he to sell for 3 or 4 dollars a yard. And even though he should not be making any profit just then, he can feel pretty confident about the future when he has ruined the foreign producer and driven him out of the field altogether.” List thinks that this shows how impossible it is for manufacturers in a new country without any measure of protection to compete with other countries whose industry is better established. But this is one of the arguments that has been most frequently used by British manufacturers in recent years in demanding protection against American competition. We would like to know what List would have thought of this.