Chapter 12 The Gains from Trade and Refusal to Trade

Arye L. Hillman

A chapter in Globalization and Emerging Issues in Trade Theory and Policy, 2008, pp 193-208 from Emerald Group Publishing Limited

Abstract: Purpose − Instances of refusal to trade stand in contrast to the theorems on the gains from trade. Two paradigms, second-best and political economy, have been used to explain refusal to trade. Murray Kemp (1962) provided a foundation for the political economy paradigm when he noted that, in the absence of lump-sum redistribution, the theorems on the gains from trade are “true but irrelevant”. This chapter takes Murray Kemp's observation as a point of departure for a consideration of the relation between individual and group gains from trade. Paradigms in explaining refusal to trade are distinguished. Methodology/Approach − This chapter examines ideas underlying explanations for refusal to participate in international trade. Findings − Two different approaches are identified in modeling and explaining why the gains from trade are compromised by refusal of governments to allow free trade. The second-best approach suggests a justification for refusal to trade while the political economy approach with public-choice foundations proposes an explanation. Practical implications − Ideology expressed in how governments are viewed can influence economic analysis.

Keywords: Gains from trade; political economy; second-best; Murray Kemp; Research paper (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eme:fegzzz:s1574-8715(08)05012-4

DOI: 10.1016/S1574-8715(08)05012-4

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