RELATED TOPICS 257 
we cannot with equity deal with an individual item of 
the tariff without a consideration of the whole fiscal 
system. This difficulty is of special importance in this 
case; for while the farmer is protected, he has to 
purchase supplies of both production and consumption 
goods from other protected industries. 
(b) General Effects of Protection—A priori reason- 
ing proves conclusively that, other things being equal, 
the imposition of duties on imports raises prices to the 
consumer, but not necessarily by the amount of the 
duty. Such conceptions as the inelasticity or elasticity 
of demand, the conditions of production, whether 
decreasing or increasing return, whether the country 
is a monopoly buyer, etc., alter the degree to which 
price will rise.* Thus, to take one example of particular 
interest to our problem, let us consider what will happen 
if an import duty is levied on a commodity ‘‘obeying’’ 
the law of diminishing returns. With protection granted 
to the industry, production, in the absence of counter- 
acting causes, will be extended. In the case of the wheat 
industry, the margin of cultivation will be extended, 
that is, recourse will be had to poorer soils, a factor which 
will aggravate the tendency for prices to rise, originated 
by the protective tariff. An import duty on wheat there- 
fore raises the price of wheat to the consumer by more 
than the amount of the duty.t 
But the question is so important that a general 
discussion of the relation of protection to the rural 
industries generally is not irrelevant. The advocates 
for protection who wish to examine the problem 
thoroughly have evidently forgotten the valuable 
Report on the Cost of Living in New Zealand in 1912. 
*For a full discussion of this, see Taussig, ‘‘Some Aspects 
of the Tariff Problem.’’ Pages 3-17. 
tIn practice, however, this argument is modified by the 
Unportanee of the outside market in determining prices in New 
ealand. 
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