Papers by Steven Suranovic
A Moderate Compromise, 2010
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A Moderate Compromise, 2010
One of the most important questions in economics and politics is what sort of laws, institutions,... more One of the most important questions in economics and politics is what sort of laws, institutions, and policies a society should implement. A country’s constitution defines the basic rules and procedures determining how a country will be governed and what rights and privileges its citizens will enjoy. Each country’s legislature establishes rules, regulations, and laws that its citizens must follow. Within each country’s constitution a process is defined for changing these laws. Government policy is concerned with the following question: what is the best set of rules and laws for a country to implement? One thing seems clear from the political debates and the continual discussion about how policies ought to be further changed and adjusted; nations have still not reached any sort of “policy equilibrium.”
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Society, 2016
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A Moderate Compromise, 2010
Much of what theory can teach us about the appropriate role for government policy can be gleaned ... more Much of what theory can teach us about the appropriate role for government policy can be gleaned by understanding what theory teaches about international trade. This is because international trade theory has largely used what are known as general equilibrium models to understand the effects of trade and domestic policies. General equilibrium models offer a comprehensive view of an economy because they account simultaneously for impacts in the output markets, labor markets, and capital markets. Any policy affecting one market is shown to affect every other market both domestically and internationally. Although the focus of trade theory is primarily on trade of course, the general conclusions that derive from studying these models have a much broader applicability.
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Journal of International Economics, 1993
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Journal of International Economics, 1992
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We incorporate culture into a standard trade model in two distinct ways. In the ¡°cultural affini... more We incorporate culture into a standard trade model in two distinct ways. In the ¡°cultural affinity from work¡± model, workers receive a non- pecuniary cultural benefit from work in a particular industry. In the ¡°cultural externality¡± model, consumers of a product receive utility from other consumer¡¯s consumption of a domestic good. We show that resistance to change due to cultural
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A Moderate Compromise, 2010
Mutually voluntary exchange is the best example of a win-win situation. Whenever a bilateral exch... more Mutually voluntary exchange is the best example of a win-win situation. Whenever a bilateral exchange occurs, both parties must profit, for if not, one party would simply have refused to trade. This basic result is sometimes used to argue that a free market economy, consisting of billions or trillions of bilateral voluntary exchanges, must therefore be to the benefit of everyone. In one sense this is true, but upon a more careful investigation, it is also misleading. To clarify the distinction, this chapter will explain in some detail how competitive markets are likely to work. However, the competitive process we need to understand is not the “perfect competition” described in standard economic models. Rather, we need to understand dynamic competition as described by Joseph Schumpeter (1942) when he talked about creative destruction. For Schumpeter, the crucial economic dynamic was one in which new businesses rise up in a creative process while existing businesses are simultaneously destroyed. Friedrich Hayek described this same dynamic competition when he discussed competition as a discovery process and the free market as a “spontaneous economic order.”1
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A Moderate Compromise, 2010
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A pure exchange model in an Edgeworth box diagram is used to highlight the basic system of market... more A pure exchange model in an Edgeworth box diagram is used to highlight the basic system of market ethics that is implicitly presumed in all neoclassical economic analyses. A pure exchange model introduces the central tenet of Adam Smith that self-interest motivated traders in a market can achieve mutually beneficial outcomes. But the model also displays outcomes that, while they would not be voluntarily chosen, are nonetheless achievable by the use of force, threats of force, or deception. As such the Edgeworth box is a vehicle to explain requisite ethical principles, including the importance of property rights and perfect information, by demonstrating the unfavorable outcomes that can arise when excessive self-interest (aka greed) is used to take advantage of others.
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A Moderate Compromise, 2010
The key policy proposal in this study is unfettered free trade. How is the world supposed to achi... more The key policy proposal in this study is unfettered free trade. How is the world supposed to achieve that goal? Currently, movements toward trade liberalization, either through the implementation of free trade agreements or within the WTO, involve a process of reciprocity. Each country agrees to reduce some of its trade barriers, but only if the other countries agree to lower their barriers reciprocally. If other countries refuse to reduce barriers sufficiently, then progress toward liberalization is halted. Furthermore, if another country raises its trade barriers and reneges on a previous promise, current trade agreements allow the other country to retaliate by removing some of its previous trade concessions.
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Choice Reviews Online, 2011
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A Moderate Compromise, 2010
Economic theory strongly supports the following two conclusions: first, trade liberalization will... more Economic theory strongly supports the following two conclusions: first, trade liberalization will result in a complex redistribution of income; and second, depending on the circumstances, trade liberalization can lead either to an improvement or to a reduction in a nation’s total welfare. Although theory can identify some of the characteristics of those who might gain and lose, without careful empirical measurement, it is impossible to know precisely who will gain and lose how much from freer trade. Whether national welfare rises or falls is important too, since economists often assuage the income redistribution concerns by suggesting that compensation be given to the losers from trade, drawn from the extra benefits accruing to the winners. However, the only way to ensure that everyone gains from free trade after compensation is if there is a positive national welfare effect from trade liberalization.
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A Moderate Compromise, 2010
If we cannot identify who wins and loses, and we cannot measure outcomes very precisely, and we c... more If we cannot identify who wins and loses, and we cannot measure outcomes very precisely, and we cannot compensate effectively, then how are we supposed to decide what to do? How are trade policies, or other public policies, to be chosen? One possible answer is provided by groups that have risen up in opposition to free trade and globalization. Many of them look upon economic theories and models with suspicion. They do not believe that economic efficiency is of utmost importance and remain unconvinced by empirical studies suggesting trade liberalization is a good thing. Instead, these groups unite around a call for social justice and fairness.
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A Moderate Compromise, 2010
Economic theory supports the contention that many people will suffer losses because of globalizat... more Economic theory supports the contention that many people will suffer losses because of globalization, but it also clearly shows that many other people will benefit. Because globalization will not affect everyone equally, and because there are many winners and losers, globalization is naturally contentious. The contentiousness inspires a continual discussion of appropriate policy.
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Challenge, 1997
the 1996 Republican presidential primaries, Pat Buchanan argued that the North American Free Trad... more the 1996 Republican presidential primaries, Pat Buchanan argued that the North American Free Trade Agreement (NAFTA) is causing the loss of American jobs. That spring Buchanan visited a closed textile plant in South Carolina to emphasize his belief that free trade agreements cause factories to close and jobs to be lost. Buchanan argued that continuing movements to free trade will put many other middle-class jobs at risk. On the same day Senator Bob Dole visited a new BMW plant in South Carolina. He argued that the new jobs at the plant are precisely the kind of opportunities one can expect from free trade. Each of these candidates was trying to convince voters that his argument was right. Unfortunately for voters, economic theory suggests both are right. In the continuing public debate between free trade and pro-
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Advances in Health Economics and Health Services Research
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This paper applies a behavioral economics model of cigarette addiction to the issue of oil usage ... more This paper applies a behavioral economics model of cigarette addiction to the issue of oil usage and climate change. Both problems involve consumption of a product that causes long-term detrimental effects and for which current reductions in usage induces an adjustment cost. The paper argues that the problem of oil addiction is much more complex than cigarette addiction and thus may be more difficult to resolve. It also suggests that oil addiction, like cigarette addiction, may generate a long period of time in which individuals express sincere desire to convert to clean energy, but do little to accomplish that outcome. Finally the paper uses the model to argue that policies to reduce the present cost of alternative non-carbon energy sources to induce voluntary adjustments in energy usage are likely to be more effective than an approach to emphasize the long term catastrophic effects of climate change coupled with policies to force changes in current energy consumption.
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Papers by Steven Suranovic