A:

The "Candle Maker's Petition" is a satire of protectionist tariffs written the by great French economist, Frederic Bastiat. In many ways, it expanded on the free market argument against mercantilism set forth by Adam Smith, but Bastiat's target was government tariffs that were levied to protect domestic industries from competition. In Bastiat's "Candle Maker's Petition", all the people involved in the French lighting industry, including "the manufacturers of candles, tapers, lanterns, sticks, street lamps, snuffers and extinguishers, and from producers of tallow, oil, resin, alcohol, and generally of everything connected with lighting" call upon the French government to take protective action against the unfair competition of the sun.

They argue that forcing people to close "all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull's-eyes, deadlights, and blinds - in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses" will lead to a higher consumption of candles and related products. In turn, they reason, the industries that those in the lighting industry depend on for materials will have greater sales, as will their dependent suppliers, and so on until everyone is better off without the sun.

This satirical essay suggests that forcing people to pay for something when a free alternative is available is often a waste of resources. In this case, the money that people spend on additional lighting products would indeed boost profit for candle makers, but because this expenditure is not required, it is wasteful, and diverts money from other products. Rather than producing wealth, instituting the candle maker's petition would lower overall disposable income by needlessly raising everyone's costs.

Similarly, using tariffs to force people to pay more for the domestic goods when cheaper foreign imports are available allows domestic producers to survive natural competition, but costs everyone as a whole. Additionally, the money put into an uncompetitive company would be more efficiently placed into an industry where domestic companies have a competitive advantage. (To learn more about the theories that have shaped economics, read The History Of Economic Thought.)

RELATED FAQS
  1. How is an Evening Star pattern interpreted by analysts and traders?

    Identify the evening star candlestick pattern, and learn why it is interpreted by market analysts and traders as a bearish ... Read Answer >>
  2. How do I build a profitable strategy when spotting an Evening Star pattern?

    Create a trading strategy designed to take advantage of the evening star candlestick pattern indication of a market reversal ... Read Answer >>
  3. How do I build a profitable strategy when spotting a Morning Star pattern?

    Create a profitable trading strategy to use when spotting a morning star candlestick pattern that indicates a bullish market ... Read Answer >>
  4. What are the most common Bearish patterns used by traders?

    Discover some of the commonly used bearish chart patterns that traders identify as potential market turning points to the ... Read Answer >>
  5. How do I implement a forex strategy when spotting a Piercing Pattern?

    Learn a forex trading strategy that can be implemented when a trader recognizes a piercing pattern candlestick formation ... Read Answer >>
  6. What is the broken window fallacy?

    The broken window fallacy was first expressed by the great French economist, Frederic Bastiat. Bastiat used the parable of ... Read Answer >>
Related Articles
  1. Financial Advisor

    Using Candles To Understand Market Behavior

    The conventional interpretation of candle charts focuses on the many different candle formations, but Dan Gramza shows how he uses candle charts to identify market behavior. This includes how ...
  2. Investing

    Tariffs

    Tariffs, or customs duties, are taxes imposed on foreign goods and services. In addition to providing a country with additional revenue, tariffs offer protection to domestic producers. Imported ...
  3. Insights

    The Basics Oof Tariffs And Trade Barriers

    Everything you need to know - from the different types of tariffs to their effects on the local economy.
  4. Insights

    Adam Smith and "The Wealth Of Nations"

    Adam Smith's 1776 classic "Wealth of Nations" may have had the largest global impact on economic thought.
  5. Trading

    Heikin-Ashi: A Better Candlestick

    The Heikin-Ashi technique modifies the open-high-low-close series that most candlestick charts use, thus making trends easier to spot.
  6. Trading

    Inside Day Bollinger Band® Turn Trade

    We'll show you which candles shed light on successful trend trades.
  7. Investing

    Generics Won't Be Delayed by Citizen Petition Rule

    The Citizen Petition rule, often used as a tool to delay generic drug launches, was amended by the FDA to stop its misuse.
  8. Trading

    Tweezers Provide Precision For Trend Traders

    How to use candlestick tweezer patterns for analyzing and trading financial markets.
  9. Insights

    Understanding Diseconomies of Scale

    Diseconomies of scale is the point where a business no longer experiences decreasing costs per unit of output.
RELATED TERMS
  1. Frederic Bastiat

    A 19th-century philosopher and economist famous for his ideas ...
  2. Short Line Candle

    Short Line Candles – also known as ‘short candles’ – are candles ...
  3. Three Outside Up/Down

    The three outside up and three outside down are three-candle ...
  4. Upside/Downside Gap Three Methods

    The gap three methods are three-candle reversal patterns that ...
  5. Stalled Pattern

    The stalled pattern, also known as the deliberation pattern, ...
  6. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is ...
Hot Definitions
  1. Leveraged Buyout - LBO

    The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. ...
  2. Current Assets

    A balance sheet account that represents the value of all assets that can reasonably expected to be converted into cash within ...
  3. Tax Liability

    The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable ...
  4. Preferred Stock

    A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares ...
  5. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  6. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
Trading Center