Marshall’s Producer Surplus and Value-Added: ‘A Case for Protectionism?’ (A short note)
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On several occasions, authors like Dani Rodrick and Thomas Piketty questioned the benefits of trade liberalization. The rationale for liberal economic policies refers inter alia to welfare concepts, in particular the producer and consumer surpluses which were proposed by Alfred Marshall in his seminal work Principles of Economics, published in 1890. Despite extensive uses, the concepts of surpluses raise questions. From a semantic perspective, the concept of producer surplus, as it is presented in Marshall’s seminal work, seems to be broader than what is proposed in the dominant economic discourse; in other words, workers should also be seen as producers. Furthermore, considering international trade theory and policy, the concept of effective protection refers to value-added, which encompasses all incomes (namely wages, profits…) generated by the production and the sale of products, which may correspond to what was initially defined as the producer surplus by Marshall. In this short note, it is shown that a surplus concept, underlining the importance of workers as producers and based on value-added, has major implications in terms of welfare analysis of the impacts of liberal trade policies; eventually, it could support protectionism.