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Quotation of the Day…

Posted By Don Boudreaux On November 28, 2012 @ 7:24 am In Business as usual,Crony Capitalism,Other People's Money,Politics,Seen and Unseen,Trade | Comments Disabled

… is from page 92 of the 3rd edition (2009) of Douglas Irwin’s indispensable volume Free Trade Under Fire [1] (link added):

Pareto [2]‘s idea that the benefits of trade protection are highly concentrated, while the costs are highly diffused, has been a central point of departure for explaining the existence and persistence of import restrictions.

The U.S. sugar program, once again, illustrates this imbalance in costs and benefits.  Import restrictions have kept domestic sugar prices at roughly twice the world price.  The General Accounting Office estimated that domestic sugar producers reaped about $1 billion in 1998 as are result of this policy.  However, 42 percent of the total benefits to sugarcane and sugar beet growers went to just one percent of all producers; indeed, just seventeen sugarcane farms collected over half of all the cane growers’ benefits.  Clearly, the owners of these few farms have a powerful incentive to maintain the import restrictions.  Although the sugar policy imposes far larger costs on consumers of sweeteners ($1.9 billion [in 1998] according to the GAO) than are distributed to growers, consumers are far more numerous, and these costs are spread widely among them.

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[1] Free Trade Under Fire: http://www.amazon.com/Free-Trade-Under-Fire-Third/dp/0691143153/ref=la_B000APHOKO_1_1?ie=UTF8&qid=1354105352&sr=1-1

[2] Pareto: http://www.econlib.org/library/Enc/bios/Pareto.html

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