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Quotation of the Day…

… is from page 180 of Razeen Sally’s important 1998 book, Classical Liberalism and International Economic Order (footnote excluded):

Such ‘political market failure’ is even more characteristic of foreign economic policy than domestic economic policy. Executive discretion, as well as weak parliamentary and judicial control, characterise foreign economic policy-making, at least in part because information on foreign economic policy is less readily available to the legislature, the courts and the broader public. This makes highly discretionary foreign economic policy processes more that usually amenable too capture by the rent-seeking activities of a relatively small number of well-organised and well-informed producer groups. Hence the frequency and staying power of protectionist outcomes, even though they are inimical to the common weal.

DBx: As is true of all theories, public choice can be – and has been – criticized for the unrealism of its assumptions; it can be – and has been – mocked for its ‘reductionism’ and corresponding failure to account for the richness of the motivations of those who engage in political activities. Whatever the merits or demerits of these criticisms, public-choice analysis beautifully explains trade policy. No tweaking of the analysis is necessary, and certainly no alternative theory of political action is required, to improve the explanation. Public choice, and public choice alone, explains it all – or, well, to hedge somewhat, 99 percent of it.

The strongest and surest impressions that any reader of Doug Irwin’s massive history of United States trade policy – Clashing With Commerce (2017) – is left with is just how unrelentingly successful are special-interest producer groups at determining, for their narrow material benefit, the direction and details of trade policy. Anyone who supposes that Congress, U.S. presidents, and government bureaucrats conduct trade policy to promote the general welfare and in steadfast opposition to the venal demands of special-interest groups is historically uninformed. Anyone who imagines that government officials have any interest in, or any prospect of, using blackboard models such as that of the optimal tariff or strategic-trade theory to ‘maximize’ national welfare is fantasizing.

Trade policy is beholden first, foremost, and overwhelmingly to politically influential producer groups. Even the many improvements in trade policy that have occurred during the years 1934-2017 occurred largely because these policy changes satisfied the greed of the most politically powerful special-interest producer groups, or at least did not interfere with their greedy designs. Uncle Sam granted the “concessions” (as they are absurdly called) of tariff reductions in the U.S. chiefly as a means of opening up foreign markets to U.S. exporters. The outcome – a reduction in tariffs – is unquestionably good. But this good outcome occurred only because it was in the interest of special interests. And insofar as trade policy remains hostile to the general interest – for much of it still does – the explanation for this sorry reality can be found in the machinations of special interests.