Smoot Hawley

I'm sticking with 1930.

Homework #4 solutions

This comment is in reference to the solution to Problem 1, part B. The figures I listed have net welfare loss as $50,000. I took this from the solutions manual for the text book. I do not believe that there is a net welfare loss of $50,000. Given that the two components of DWL add to $20,000, the additional $30,000 must be due to the revenue effect. However, since the problem explicitly states

"Assuming that Venezuelan import companies organize as buyers and bargain favorably with competitive foreign exporters, what is the overall welfare loss to Venezuela as a result of the quota? "

i feel that the revenue accrues to Venezuelan importers, so that revenue benefits Venezuelans. Hence the net welfare loss should only be the DWL, $20,000.

See Carbaugh, pp. 157 last paragraph, and p. 158, first paragraph.

I apologize for any confusion.

(Thanks Rosine for the clarification.)

Hint on test problem #1: It's probably easier than you think. The argument is exclusively from the point of view of the domestic / importing country.

Alternative Assignment for Class 11-10

See I-drive for a copy of an alternative assignment in lieu of class on Friday. The link to the reading is below.

“In Praise of Cheap Labor”, Paul Krugman, Slate, March 20, 1997.

http://web.mit.edu/krugman/www/smokey.html

JJ

Tardy

Many of you arrive quite late. This is addressed to you.

Generally, I'd rather you show up sometime than not show up at all, but under repeated observations, too many of you arrive rather late to class.

I'm not your daddy or your boss, but that kind of behavior isn't particularly tolerated in the work world. Enjoy my endless patience while you can. (But don't expect me to say you were particularly punctual if you ask me to be a reference.)

JJ