Monday, October 17, 2005

On power

The way the WTO negotiations are playing out (update here), you would think that a country benefits only if it able to gain market access into another country's market, or if competing exporters don't get those dang subsidies from their governments. Hence negotiations are based on "reciprocity" - I'll widen your market access, if you'll widen mine.

Just goes to show how powerless consumers are. If the consumers were all represented on the table, with influence commensurate to their numbers, then there would be no negotiations. End of story. A country would unilaterally drop its trade barriers to give its consumers access to the widest variety of goods at the widest range of prices. If another country decides to shoot itself in the foot by imposing barriers to trade, all another country would do is to try to persuade it to mend its ways. Not impose "retaliatory" trade sanctions. That would be like shooting its own foot in return! And if a foreign government opts to subsidize its exports, the importing country would yell, "Dump it all on us, please!"

The most formidable potential advocate of unilitaral trade liberalization is the consumer block. Nowhere are they represented. This goes to show that they are absolutely powerless. Yet they are obviously the most numerous. Why the absence of clout? Mancur Olson, in The Logic of Collective Action, explains this paradoxical outcome by pointing out that a group, to be influential on public policy, needs to get organized. Organization entails transaction costs (time, effort, communication, ancillary expenses). But lobbying is a public good to the entire group - once organized every member gets represented by the lobby, even if they didn't contribute (much) to the transaction cost investment. In large groups therefore we would expect tremendous free riding problems. Hence we don't see big consumer lobbies. We do get big farm lobbies, big labor union lobbies, and other industry lobbies, where the benefits are shared by few enough members to overcome the free rider problem associated with lobying and organization.

Who's left? Why, the lonely free trade economists. We're a small band, so we can get organized. Alas, our clout is nil and we are way too highbrow to have any popular appeal (who wants to hear about comparative advantage anyway?) Hey, that's why I love to read anti-globalist stuff, it's the technocrats who rule the world (minor detail: they happen to be the villains). It's as great a fantasy as any comic book, equally fun, and equally escapist.

2 comments:

Greg said...

I recall what I read in the book Commanding Heights: The Battle for the World Economy.

In it, the book describes how economists like Hayek who advocated free trade, free markets and less government were the minority and ridiculed as outcasts in a world dominated by Keynesian economics. These economists who held similar beliefs would band together and found comfort in each others' company in the face of hostility from their peers as well as conventional wisdom at that time.

However, beginning in the 70's, the tide began to turn and eventually, the ideas of Hayek, Friedman, other Chicago U economists, and others who believed in the markets and advocated less government have fuelled the changes that have occured in this age of globalization.

So keep the faith. We need people like you to write about ideas because nothing is more potent that an idea whose time has come.

In this regard, it would be good for you to build perhaps a blog think tank by linking with others who have similar ideas. People like those mentioned by Pons in his comment to one of your posts.

This is unsolicited advice - - harness the power of numbers, build a professional blog by collaborating with others, and together, you guys can aim to make that blog widely read and perhaps even quoted on major issues pertaining to economics, etc. There is power in unity. You can count on me to promote that one. It would be good to see this blog among the Top Pinoy Blogs.

Econblogger said...

Hmmm, that's a good idea. I still love the freedom this personal blog gives me. And blogging does take up quite a chunk of time. But I'm certainly open to a group blog among like-minded libertarians.
Why the heck not?