Combining rent-seeking and public choice theory in the analysis of tariffs versus quotas
Economists' continuing criticisms of protectionism make a valuable contribution to the general interest element of the forces which operate to keep propensities to protect somewhat in check. McKenzie rightly warns, however, that proposals by economists for giving protection in more efficient forms run the danger of increasing the total supply of protection. Thus, we agree that serious consideration should be given to the political economy responses which may be induced before one advocates ways of doing more efficiently what one believes should not be done in the first place. It does not follow, however, that all such policies will have net negative unanticipated consequences. In the case of tariffs versus quotas, we do not believe that we have yet sufficient knowledge of all of the relevant political economy considerations to predict about the full effects of legislation which allowed trade protection to only take the form of tariffs. We are doubtful, however, that such a measure would increase the total quantity of protection through the channels outlined by McKenzie. We believe that the same type of basic public choice analysis of the individual incentives to lobby which suggests that consumer-taxpayers will not force the political process to operate so as to maximize aggregate economic efficiency with respect to the level of protection also suggests that the net lobbying for quotas is likely to be higher on average than the net lobbying for tariffs. Political effectiveness and ability to overcome free riding on the part of tariff revenue seekers is likely to be low at the margin. Furthermore, issues of visibility and institutional structure are likely to lessen the ability of anti-protection forces to lobby against quotas. Placed within a broader framework, public choice and rent-seeking theory is consistent with the empirical evidence that where quotas are used, protection is high. Copyright Kluwer Academic Publishers 1989
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