PSC 116G Lecture Notes - Lecture 10: Comparative Advantage, General Agreement On Tariffs And Trade, Economic Liberalism
April 16th
Comparative Advantage and Liberalism
• Comparative Advantage underpins liberal int’l theory & liberal trade theory
• When states cooperate, both can benefit
• Contradicts realist view of int’l politics as a zero-sum game
• Comparative advantage used to justify increased int’l trade, decreased trade barriers,
and increased economic integration
Collective Goods
• One problem: Model does not account for the political effects of such policies
• The state only is to provide collective goods that the market cannot produce
• Collective goods: services or products that are indivisible - one supplied to one
member, all members benefits and no one can be excluded (produced by
governments)
• Education, security, law, infrastructure (roads)
• Collective goods will not be produced by firms because it is not efficient and usually
outside their self-interest
• Disincentive based on the free-rider problem
• More efficient to pay taxes and use government as the coordinating mechanism
Mercantilism
• Dominant economic thought in the early state system
• The philosophy that economics and politics are related, that politics come first, and the
economic activity should serve the interests of the state
• Primary goal of the state is to export more than it imports
• If the opposite occurs, then the state is sacrificing its power and autonomy by
becoming dependent on another
• Views international economy as a zero-sum game
• Overriding concert for relative gains, as opposed to absolute gains (economic
liberalism)
April 18th
Mercantilism
• To ensure relative gains, the state should do everything to increase the costs of imports
• Why?
• The goal is to ensure a positive balance of trade
• How?
• Protectionism
• Impossible tariffs on imports - making them less competitive
(increase prices)
• Grant subsides to its own firms - making them more competitive
(decrease prices
• Import quotas
Document Summary
If the opposite occurs, then the state is sacrificing its power and autonomy by becoming dependent on another: views international economy as a zero-sum game, overriding concert for relative gains, as opposed to absolute gains (economic liberalism) Mercantilism: to ensure relative gains, the state should do everything to increase the costs of imports, why, the goal is to ensure a positive balance of trade, how, protectionism. Impossible tariffs on imports - making them less competitive (increase prices: grant subsides to its own firms - making them more competitive (decrease prices. Import quotas: regulate imported goods, dumping: selling products for less abroad than at home, mercantilism best corresponds with realism because both looking for relative gains. Economic liberalism vs. mercantilism: primary distinction, mercantilism sees competition between states as the primary feature of the int"l system (relative gains, economic liberalism sees cooperation between states as the key to greater prosperity for all states (absolute gains)
