Particial Scarcity *Protectionism: artificial trade barriers designed to limit the competition domestic producers face. -Ex: Anti-dumping laws Excessively low quotas Excessively high tariffs *Some data: In 1789 99.9% of total federal government revenue is generated by tariffs. In 1860 94% of total federal government revenue is generated by tariffs. The Genius of the Constitution * It sets up a "user fee" where if tariffs are uniform and the major source of federal government revenue, when states enact "protectionism" it cuts revenue at the same time less federal government services are required. -Government Services include: The Navy, customs, internal improvements, (parts, canals, etc...) *War of 1812: fighting the Brtitish -British blockade by navy (doesn't let things go in or out of ports) so the reveue decreased and exports increased causing debt. -Leads to Tariff of 1816 which sets the benchmark rate (this doesn't move) *Tariff of 1828 (Abomination)* -Tariffs increase to more than 3 times the benchmark rate -Triggers Nullification Crisis -Tariff null and void in South Carolina -Returns to benchmark rate in 1857 *Moral Tariff 1861: increased tariffs to more than double the benchmark rate in one step *Business Cycle: the rise and fall of economic activity relative to the long term trend.