A UTILITARIAN ANALYSIS OF TRADE LIBERALIZATION

Robert Shelburne

No 1005, International Trade and Finance Association Conference Papers from International Trade and Finance Association

Abstract: This paper argues that the currently established welfare criterion used in international trade theory results in conclusions that are not only intellectually dishonest and deceptively misleading but are not as value free as is commonly believed. This is the result of using the Hicks-Kaldor compensation principle to evaluate the welfare effects of trade. This paper argues that trade policy needs to be framed within a legitimate moral framework that moves distribution to the forefront. The welfare effects of trade should be judged by what actually happens, not by what could potentially happen in an idealized world with costless transfers. A welfare analysis of trade is thus performed after committing the three forbidden sins of "scientific economics" by assuming cardinal utility, the law of diminishing marginal utility of income, and the sin of all sins, interpersonal utility comparisons.Presented at the Allied Social Sciences Association convention in Washington, D.C., January 2003.

Date: 2003-01-05
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Persistent link: https://EconPapers.repec.org/RePEc:bep:itfapp:1005

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