Why Do Economists Favor Free Trade but Politicians Don''t (original) (raw)

In summary, Pareto would have the Ministry of Production choose a s = a * s , compensate those who would otherwise be harmed by the choice and later consider how the residual might best be distributed. Kemp and Pezanis-Christou (1999) Economic theorists traditionally banish discussions of information to footnotes. Serious consideration of costs of communication, imperfect knowledge, and the like would, it is believed, complicate without informing. This paper, which analyses competitive markets in which the characteristics of the commodities exchanged are not fully known to at least one of the parties to the transaction, suggests that this comforting myth is false. Some of the most important conclusions of economic theory are not robust to considerations of imperfect information. Rothschild and Stiglitz (1976, p. 629) Agreement on the virtues of free trade as a means to advance the economic welfare of society is a well-known exception to economists' disagreements with one another on other matters of policy. Politicians, and the population at large, seem united in their opposition to free trade in most lands and times. Economists attribute the attitude of politicians to a lack of vision, wisdom, and leadership, while politicians dismiss the free trade arguments as simply academic-a euphemism for irrelevant. In spite of much debate, the arguments have changed little in the two centuries since Torrens and Ricardo proposed the theory of comparative advantage. In this paper we propose to perturb this stasis by recognizing that serious economic obstacles exist in realizing the net gains from trade liberalization. Gains and losses of various agents and groups are unevenly distributed among them, and the information about their magnitude is inherently private. Such information is not truthfully

The debate about trade: some small steps towards one

This paper addresses the discussion about the desirability of international trade. It starts out from the stylized observation that trade economists and 'anti-globalists' not only reject each others conclusions, but also the validity of the reference frame in which the other side makes its arguments. We mend for this problem, constructing a rational dialogue between the various parties by making differences in criteria and modes of analysis explicit. Instead of seeking to develop a comprehensive common framework, we adopt a 'pluralist' position, in which we only create a common structure in so far as necessary for meaningful dialogue. We judge the effects of trade as they follow from both the analytical models used by proponents and opponents and from the perspectives of both the criteria used by proponents and opponents. Applying different criteria to both standard and poverty-sensitive trade models, we find that both camps have valid cases, but also that diagonally opposite positions do not necessarily lead to different judgements regarding the desirability of trade. Once differences in preconceptions and criteria are cleared, a fruitful debate is therefore possible. We conclude that the debate about free trade cannot be settled by economics and should in the end take place in the moral and political arena. * Since the comparative advantage models discussed here only deal with comparative static analysis, distinguishing between a short and long run perspective is irrelevant in these cases.

THE ILLUSION OF FREE TRADE: FREE IS NOT ALWAYS FAIR

2019

According to Ricardo's (1817) perspective concerning comparative advantage, people would be better off if they specialize in one thing. After the World War II, many provocations concerning economic liberalization to create free world trade. Pros and cons surrounding free trade arouse. Some say that free trade is fair, but there are others who don"t agree. This essay is meant to explain the advantage and the disadvantage of free trade from developing country"s point of view. Our results show that free trade tends to be unfair because there happened to be spatial concentration in advanced countries. In this matter, we use qualitative method to prove that the illusion of free trade is true. The samples that we use for developed countries are Japan, USA, and EU. On the other side, we use South East Asian countries and Latin America as samples. We hope that there will be renegotiation in free trade agreements to create new balance and equality among countries.

A note on the ethics of free trade

Arguments against free trade are often couched in ethical terms. They usually describe the plight of those who lose from free trade, but seldom consider the costs of protectionism. This essay examines free trade from the perspective of several important ethical theories and concludes that free trade is consistent with each of them.

Distributing the Gains from Trade with Incomplete Information

Economics and Politics, 1991

We argue that the incomplete information which the government has about domestic agents means that tariffs become an optimal instrument to protect them from import competition. We solve for the optimal government policies. subject to the political constraint of ensuring Pareto gains from trade, the incentive compatibility constraint, and the government's budget constraint. We find that the optimal policies take the form of nonlinear tariffs, so that both buyers and sellers of the import face an effective price which exceeds its world level. We find that the tariffs are never complete, in the sense of bringing prices (or all individuals back to their initial level. Rather, it will always be possible to make some individuals strictly better off than at the initial prices, while ensuring that no persons are worse off.

Economists as Political Philosophers: A Critique of Normative Trade Theory

EUI Department of Law Research Paper No. MWP 2014/11, 2014

Economists are political philosophers. This claim is defended based on an investigation of normative arguments made in economics textbooks. The paper aims to explain, reconstruct and contest the neoclassical vision implicit in mainstream economic trade theory. Analyzing arguments made by international economists from the perspective of political philosophy, I show how the contemporary defence of free markets and trade liberalization is linked to a specific normative ideal of the political and social good.

Revisiting "The Fallacy of Free Trade

Review of International Economics, 1997

The paper examines results presented by Batra in an article entitled "The Fallacy of Free Trade" (Review of International Economics 1(1) (1992):19-31). Batra contends that technical change in Japanese manufacturing necessarily reduces US real wages in the confines of a two-good, two-country Ricardo-Viner model. A parsimonious empirical Ricardo-Viner model is constructed to analyze the same issue. It is found that the impact on US real wages is very small. Systematic sensitivity analysis shows that increases in the real wage are as likely as decreases. It is concluded that Batra's assertions are empirically unlikely.

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