Question

Most economists think free trade is best for the U.S. economy and yet politicians support tariffs and quotas. Explain how the difference between political and economic efficiency leads to this result.

Answer 1

It is true that the most economists think free trade is best for the U.S. economy and yet politicians support tariffs and quotas. The basic reason behind the most economists is to promote economic efficiency by utilizing the resources efficiently. but from political point of view, this point is valid only when we consider other countries just as trading partner without considering foreign policies, trade and political relations between the trading partners. But in real world there factors play vital role in the process of international trade.

The point which we must note that in the present scenario, the factors other than economic efficiency also influence the flow of trade.

Here we must focus on the two aspects of imposing tariffs and quotas. The one is to protect the domestic industries or to restrict the flow of trade. Protection of domestic industries is the kind of economists viewpoint but the restriction of flow of trade is somewhat a political viewpoint which is affected by many factors including political relations among the trading partners.

Most economist think from promoting economic efficiency point of view. This is possible through the promotion of free flow trade among the trading countries without imposing any tariffs or quotas.

Where as, in politicians supports support tariffs and quotas because here trade in not only depends on economic efficiency but it is majorly influenced by U.S. foreign policies, trade and political relations with the trading partners.