a) Do protectionist policies benefit producers, consumers, workers, or the government? Explain.?

Question

a) Do protectionist policies benefit producers, consumers, workers, or the government? Explain.

b) Explain how the "Buy American" theme hurts Americans.

Answer 1

Favorite Answer

It all depends on the type of policies, the state of the economy, and your beliefs about the best path to economic development.

The Import Substitution Industrialization people would argue that the right sort of protectionist policies would help everyone in the long run:

http://en.wikipedia.org/wiki/Import_substitution_i...

They note that every developed economy has protected its infant industries at some point in its history, which suggests that protection aids in economic development.

http://en.wikipedia.org/wiki/Infant_industry_argum...

http://http//www.nytimes.com/2010/12/15/business/g...

And no economist would dispute that the infant industries argument is logical economics (though many would note that in reality, it is an argument more often used to protect political cronies rather than real infant industries)

Then there are the Optimal Tariff Theory argument which say that for a large economy, the optimal tariff is not zero:

http://www.wisdomsupreme.com/dictionary/optimal-ta...

And the dangers of relying on trade to supply essential goods:

http://www.washingtonpost.com/wp-dyn/content/artic...

http://www.stripes.com/news/from-the-s-s-archives-...

And the dangers of extreme specialization. Taleb Nassim notes:

"I find it both unethical (& blind) on the part of economists to teach Ricardo's comparative advantage (something that is "optimal" under some set of fixed, nonstochastic assumptions, i.e. price of goods remain fixed) without telling us about the Irish potato famine, the exact result of a model error coming from monoculture, a straight application of the idea. In the mid-19th Century, one and a half million persons died, another million emigrated (mostly to the U.S.). I found so many cases of collapses coming from such optimization (Egypt from cotton, American Indians in the SouthWest, silk in Lebanon)."

http://www.huffingtonpost.com/ian-fletcher/the-the...

http://www.voxeu.org/index.php?q=node/5767

So while there is no doubt that in general protectionist policies benefit the government and producers at the cost of everyone else, that is only a generality and is false in many cases.

Sometimes no one benefits at all:

http://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_...