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 do I Implement a forex strategy when spotting a Morning Star pattern?

    Learn how to design a forex trading strategy to use for trading the morning star candlestick pattern, an indicator of a bullish ... Read Answer >>
  2. What are the differences between operating profit and operating income?

    Learn how operating income, also known as operating profit, is determined. Also, see how investors use this number on the ... Read Answer >>
  3. What do the different colored candlesticks mean?

    A typical candlestick chart is composed of a series of bars, known as candles, which vary in height and color. Read Answer >>
  4. How are Three White Soldiers patterns interpreted by analysts and traders?

    Understand the basics of the three white soldiers candlestick pattern and how this bullish reversal signal is interpreted ... Read Answer >>
  5. How effective is creating trade entries after spotting a Three Black Crows pattern?

    Understand the basics of the three black crows candlestick pattern and how this reversal signal is used for the creation ... Read Answer >>
  6. How does Federal Trade Commission use the Herfindahl-Hirschman Index to evaluate ...

    Understand specific examples of domestic products that rely on protective tariffs to survive. Learn about the varying tariff ... 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

    Tales From The Trenches: Location Is Everything

    When a candle pattern re-occurs near a moving average, it may indicate future support or resistance.
  3. Trading

    The Seven-Day Extension Fade

    It's possible to pick a top or bottom with no indicator support. We'll show you how this strategy works.
  4. Insights

    The Basics Of Tariffs And Trade Barriers

    Everything you need to know about trade barriers and tariffs and their effects on the local economy.
  5. Trading

    The S&P 500 is starting to look bearish

    After creating a bearish candle last Friday, the S&P 500 is now vulnerable to a downside move.
  6. 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.
  7. Trading

    Using Bullish Candlestick Patterns To Buy Stocks

    These five popular candlestick chart patterns signal a bullish reversal in downtrend.
  8. Trading

    Tweezers Provide Precision for Trend Traders

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

    E*TRADE: With Tariffs Official, Best to Take a Wait-and-See Approach

    With tariff proposals now signed by President Donald Trump, investors are best served taking a wait-and-see approach, advised E*TRADE.
RELATED TERMS
  1. Frederic Bastiat

    A 19th-century philosopher and economist famous for his ideas ...
  2. Three Inside Up/Down

    The three inside up and three inside down are three-candle reversal ...
  3. Three Outside Up/Down

    The three outside up and three outside down are three-candle ...
  4. On Neck Pattern

    The on neck pattern occurs when a long bearish candle is followed ...
  5. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is ...
  6. Real Body

    In candlestick charting this is the wide part of a candle that ...
Hot Definitions
  1. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  2. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  3. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  5. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  6. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
Trading Center