Free Trade and Laissez Faire: Has the Wheel Come Full Circle?

12 Pages Posted: 13 Jul 2003

See all articles by Deepak Lal

Deepak Lal

University of California, Los Angeles (UCLA) - Department of Economics; University College London

Abstract

This paper notes that there is a need to get to a fourth stage in the evolution of the relationship of free trade to laissez faire going beyond the three stages identified in Max Cordon's magisterial book. In the first stage free trade was a special case of the argument for laissez faire. In the second stage many arguments for protection arose with various qualifications to the case of free trade and laissez faire. In the third stage the link between free trade and laissez faire was broken and in the theory of domestic distortions it was noted that all arguments for protection except in the case of monopoly power in trade were second best arguments. Moreover, it was possible to devise measures such as taxes and subsidies that reduced the distortion through government intervention. But noting that government intervention itself carries with it problems of rent seeking and directly unproductive activities as well as the taking into the proper role of Government, laissez faire seems the best policy. Hence the need for a fourth stage in the evolution of free trade and laissez faire to link them together again.

Suggested Citation

Lal, Deepak K., Free Trade and Laissez Faire: Has the Wheel Come Full Circle?. World Economy, Vol. 26, pp. 471-482, April 2003. Available at SSRN: https://ssrn.com/abstract=418952

Deepak K. Lal (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States
310-825-4521 (Phone)
310-825-1011 (Fax)

University College London

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London
United Kingdom

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