A General Post Keynesian Theory of Protection

Abstract

The analysis of commercial policy has been dominated by neoclassical models and methods. These approaches use assumptions and generate predictions that do not accord well with established empirical evidence. In particular, neoclassical methods afford little or no scope for demand effects to influence the course of domestic output, and they tend to exaggerate the domestic price effects of changes in protection, in exchange rates, and in other sources of world price movements. One reason why the orthodoxy has prevailed unchallenged for so long is that Post Keynesian economists have not assembled any consistent alternative. This is surprising, both because the foundations of a Post Keynesian theory of trade protection are already in place,' and because so much progress has been made in applying these approaches in other areas of international economics.2 Common observation confirms that protection policy issues loom large in current policy discussions. Therefore, if it is genuinely important for Post Keynesian economists to cast fresh light on contemporary economic problems (according to the editors

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