2.7 — The Political Economy of Trade Policy — Class Content

Meeting Date

Thursday, April 13, 2023

Overview

Today, we look at the politics of trade policy, examining how different groups in a modern democracy have different objectives and face different incentives, culminating in trade policy that concentrates benefits and disperses costs. The tools we use are standard in “public choice” analysis — the economic analysis of politics. You can learn more in my public economics course.

Readings

Required Readings:

• Caplan, 2007, “The Myth of the Rational Voter”
• Somin, 2014, “When Ignorance Isn’t Bliss”
• Buchanan, 1984, “Politics Without Romance”
• Mitchell, 2013, “The Pathology of Privilege: The Economic Consequences of Government Favoritism”

Optional Readings

• Grossman and Helpman, 1994, “Protection for Sale”
• Baldwin and Magee, 2000, “Is trade policy for sale? Congressional voting on recent t?”

Helpful:

• Public Choice
• The Logic of Collective Action
• Government failure
• Rational ignorance
• Rent seeking
• Regulatory capture

Questions To Help Your Reading

• Why is good governance a public good, subject to a free rider problem?
• What is “rational ignorance”?
• What is Caplan’s idea of “rational irrationality” and how is it different from “rational ignorance?”
• According to Caplan, what are the four systematic biases?
• Why do people vote or not vote? How do people that do vote choose how they vote?
• What is the principle of “concentrated benefits and dispersed costs?”

Slides

Below, you can find the slides in two formats. Clicking the image will bring you to the html version of the slides in a new tab. The lower button will allow you to download a PDF version of the slides.

Tip

You can type h to see a special list of viewing options, and type o for an outline view of all the slides.

I suggest printing the slides beforehand and using them to take additional notes in class (not everything is in the slides)!

Download as PDF