The politics of trade.doc

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Political Science
POL 1025
John Freeman

The Politics of Trade Why do countries trade? • Specialization (in your comparative advantage) and trade produces pareto superior outcomes in global consumption ◦ 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
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