MAX 132 Lecture Notes - Lecture 4: Washington Consensus, Protectionism, Neoliberalism
22 Sep 2016
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Classical trade theory: we don"t have the time/resources/skill to produce everything we want ourselves. The law of comparitive advantage: countries should specialize in the products for which they have the largest comparitive advantage with and then trade. (eg: china can produce plastic toys cheaper than any other country because of its resources. Theoretical foundations: comparitive advantage, market determinism, and neoliberalism. Decrease state spending (especially: subsidies and protections) Let markets determine interest and exchange rates. Basically: free trade regime suggests ***more market, less state*** Formal institutions: example: us factories moving to mexico. Good than bad: negative impact on a. i. a. ii. Local tax base: positive impacts b. i. b. ii. b. iii. Protectionism costs more 22840 in the united states. Protection violates sen"s fairness principle: consumption in developing countries goes up, developing countries often pursue more free trade, not less. Conclusion: the benefits of free trade are immense.
