Reassessing Marshall’s Producers’ Surplus: A Case For Protectionism

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Abstract

The rationale for liberal economic policies refers inter alia to the so-called producer and consumer surpluses, namely welfare concepts which were proposed by Alfred Marshall in his seminal work Principles of Economics, first published in 1890. In the case of trade policy, relying on surpluses and referring to the ‘small country case’, it is recommended to remove tariffs barriers imposed on the imports of commodities because it should increase welfare and, in theory at least, the losers of such a trade policy orientation can be compensated with the use of adequate transfers from winners.

Despite extensive use, the concepts of surpluses still raise key-questions that may alter the case for free trade. Thus, from a purely semantic perspective, the concept of producer, as presented in Marshall’s work, seems to be broader than what is proposed in the dominant economic discourse; in other words, workers should (also) be seen as producers.

Assuming the workers are considered as producers, at least their wage rents should be taken into account when discussing the impacts of trade liberalization, and added to profit losses – as a result, the case for free trade weakens considerably, it could even vanish.

Posted for comments on 12 May 2017, 11:00 am.

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