DO DISPARITIES BETWEEN REAL AND MONEY PRICES MODIFY TRADITIONAL ARGUMENTS FOR FREER TRADE.
RAND CORP SANTA MONICA CALIF
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In the mid-20th century real costs are often not reflected by money costs, or real benefits by money gains. The main cause of these discrepancies is the intervention in price making of governments, large corporations, labor unions, etc. As a consequence, it is sometimes alleged that the economic efficiency that is supposed to flow from policies of freer trade cannot be relied upon in the world of today. However, it can be shown that, from the selfish viewpoint of a single country, the existence of discrepancies abroad between money and real costs and gains in no way modifies traditional arguments for free trade. Moreover, for a country like the United States, which has full employment, a strong current account, and a highly mobile labor force, it can be shown that import restrictions are usually not the answer when real values and money prices are disproportionate at home. Author