chapter  26
14 Pages

INTEREST GROUPS AND POLICY FORMULATION

WithChris Milner

One indication of the growing interest among economists in issues of public choice has been the greater attention given in the last two decades to the political economy of protectionism. If we hypothesize that producers and particular income groups are the demanders of protection and elected representatives are the suppliers of protection, then the form and content of trade policy can be viewed as the outcome of the political market-place. If, in turn, voters and their elected representatives pursue their own selfinterest, this public choice model predicts that Pareto efficient policies will be implemented under majority rule, when conditions such as perfect information, zero voting costs and costless income redistribution apply. In a vote between a trade policy that restricts aggregate consumption opportunities and one that enlarges those possibilities, the majority should vote for unrestricted trade since it is possible to make a majority of voters (or even all voters) better off.