ECON 103 Lecture Notes - Lecture 9: Mercantilism, Free Trade, Protectionism
28 Jul 2016
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Economics of trade (international trade: 90% of economists support free trade, countries don"t trade; individuals trade, state of economic thinking before adam smith= mercantilism. Wealth is fixed in size (there"s a certain amount of wealth in the world that doesn"t grow or shrink) Money is wealth and wealth is money. When people trade there is a winner and loser. If one person gains, then one person must lose. Trade policy should encourage maximum exports and discourage imports. Export= good or service produced domestically and sold overseas. America: encouraged with subsidies (government gives you money when you sell things overseas) Import= goods or services produced overseas and sold domestically. America: believed that imports should be taxed (tariffs). The higher the tariff, the higher the discouragement for americans to stop buying items from overseas: tariffs are raised to encourage americans to buy domestic products and stop buying things overseas. Beggar thy neighbor = goal is to impoverish your neighbor.
