Market disturbances and protection : efficiency versus the conservative social welfare function / W.M. Corden.

Abstract

Market disturbances tend to give rise to protectionist measures. The central theme of this paper is that these measures are concerned primarily with the adverse effects of the disturbances on sectoral incomes. Protection is the manifestation of a "conservative social welfare function". This is compared with the "efficiency approach" usually employed by economists, the logic of which is the "long-term mutual gain argument". Various interventionist policies (temporary or permanent protection, adjustment assistance, quotas, voluntary export restraints) are compared, taking both the efficiency approach and Paper presented to the Conference on Trade Problems and Policies, Centre of Policy Studies, Monash University, February 13-14 1984. I am particularly indebted to Carl Hamilton and Gary Sampson for comments and discussion. I owe to Gary Sampson the suggestion that I tackle the issues considered here, with the particular aim of illuminating aspects of the Multi-Fibre Arrangement and the logic of safeguard measures. Readers familiar with my own work should note that most of the ideas of the first four sections (and especially the concept of the "conservative social welfare function") can be found in my book, Trade Policy and Economic Welfare, Oxford University Press, 1974. Some of the ideas of the last section are developed in more detail in "Relationships between Macroeconomic and Industrial Policies", The World Economy, 3, September 1980, 167-84- The present paper is related to, and overlaps with, a much longer paper prepared in 1983 for UNCTAD. the conservative social welfare function into account. The international aspect (as distinct from the point of view of the protecting country only) is considered, and it is noted that one concern may be for a Harmonious International System - a concept itself possibly implying a conservative social welfare function. Show more