Microeconomics · free preview
The Protection Debate
Trade raises total surplus yet loses politically because its losses are concentrated and its gains are dispersed, and the standard arguments for protection mostly fail while compensation mostly could work.
1. Concentrated losses, dispersed gains
Concentrated losses, dispersed gains
2. The arguments, taken seriously
The arguments, taken seriously
3. The one real exception and its revenge
The one real exception and its revenge
4. Compensation, the economist's answer
Compensation, the economist's answer
5. The political asymmetry
With 8,000 workers each losing 6,000 dollars and 60 million consumers each gaining 80 cents, why does protection usually win the lobbying fight despite equal totals?
6. Evaluating the infant industry claim
A minister argues that fledgling chip plants need ten years of tariffs to mature. What makes the claim credible rather than a blank check?
7. The terms-of-trade exception
Why can a large country, unlike the small country of the last lesson, sometimes gain from a modest tariff?
8. The compensation principle
A tariff costs consumers 1040, pays producers 560 and the government 320, destroying 160. What does the compensation principle recommend instead?
9. The stakes per head
Eight thousand mill workers lose a total of 48 million dollars a year to imports. Compute each worker's average annual loss in dollars, and write the number.
10. The sleeping majority
Sixty million consumers gain the same 48 million dollar total. Compute each consumer's average annual gain in dollars, and write the number without decimals.
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