This paper by Paul M. Romer explores the welfare costs of trade restrictions, particularly in the context of new goods and the assumption that the set of goods in an economy is fixed. The typical economic model assumes that the set of goods remains unchanged, leading to a small efficiency loss from tariffs. However, if the economy can introduce new goods through international trade, the welfare loss can be significantly larger, up to twice the tariff rate. Romer argues that this assumption has important implications for economic growth and welfare analysis, especially in developing countries, where trade restrictions can prevent the introduction of new goods and productive activities. The paper also discusses the philosophical resistance to the idea that new things can happen at every juncture, which has hindered the exploration of the implications of new goods in economic theory. Romer emphasizes that the presence of fixed costs associated with introducing new goods is crucial for understanding the dynamics of economic growth and the potential for welfare gains from trade liberalization. The paper concludes by highlighting the importance of considering the creation of new goods in economic analysis and the need to overcome technical and philosophical barriers to fully appreciate their significance.This paper by Paul M. Romer explores the welfare costs of trade restrictions, particularly in the context of new goods and the assumption that the set of goods in an economy is fixed. The typical economic model assumes that the set of goods remains unchanged, leading to a small efficiency loss from tariffs. However, if the economy can introduce new goods through international trade, the welfare loss can be significantly larger, up to twice the tariff rate. Romer argues that this assumption has important implications for economic growth and welfare analysis, especially in developing countries, where trade restrictions can prevent the introduction of new goods and productive activities. The paper also discusses the philosophical resistance to the idea that new things can happen at every juncture, which has hindered the exploration of the implications of new goods in economic theory. Romer emphasizes that the presence of fixed costs associated with introducing new goods is crucial for understanding the dynamics of economic growth and the potential for welfare gains from trade liberalization. The paper concludes by highlighting the importance of considering the creation of new goods in economic analysis and the need to overcome technical and philosophical barriers to fully appreciate their significance.