The Politics of Trade
Why do countries trade?
• Specialization (in your comparative advantage) and trade produces pareto superior outcomes in
◦ We all specialize in trade
◦ Specializing creates higher consumption
◦ if you specialize in trade, you will consume more than if you live in autarky (liberalist argument)
▪ Autarky: being totally dependent on yourself; not being involved in the world system
◦ If this works for individuals, why doesn't it work for countries?
• Pareto Outcomes: at least one person better off and no one worse off
◦ Pareto Frontier: uses all of the resources
◦ Pareto Inferior: a party ending up with less than they started with
◦ Pareto Optimum: using all of the resources to create pareto outcomes
◦ Pareto Superior: Everyone either has the same or has more
◦ Trade doesn't allow Pareto Inferior because of the specialization
▪ ought to engage in free trade
Political Science V