Let's get strategic

I found Krugman's discussion of free trade, protectionism and strategic trade to be quite interesting, especially knowing now that he just won the Nobel prize for is work on the analysis of trade patterns and location of economic activity (aka economic geography). Just recently I've become and advocate of free trade (Thanks Professor Blomberg!) instead of fair trade, so reading this chapter first put me on the fence on what I truly believe in terms of trade because of his strategic trade and protectionism arguments. I found his strategic trade policy arguments interesting and somewhat convincing as I saw it being a middle of the road between free and fair trade. Strategic Trade Policy, however "is really an argument for a limited government industrial policy consisting of carefully targeted subsidies, not for tariffs and import quotas." That being said, it seems like a strategic trade policy is a lot of work and could greatly interfere with free market efficiency which is not worth it, especially if "there just isn't any evidence that an aggressive strategic trade policy can produce large gains." Overall, strategic trade may work and it may have to work given that other major players are resorting to this policy method. Free trade, although probably best for our nation, may not be feasible all the time given that "free trade becomes very difficult to sustain politically if there is a widespread and growing perception that one of the main players is following different rules." All countries need to be on the same page for trade, but when we're all trying to protect our own interests, sometimes at the expense of others, getting countries on the same page is a difficult task. Thus, it may be necessary to get strategic to benefit ourselves the most.

Also, unlike Erik, I really enjoyed Blinder's book. I really empathized with what he said and completely agreed with his hard head, soft heart approach to policy. I just wish that politics and party divides were a little less involved in our economic policy because this involvement makes it a bit more difficult to achieve this hard head, soft heart approach that Blinder discusses. What would our world be like if we tried to achieve this "happy blend" buy joining "the rational economic calculation of the conservative Republican to the compassion of the liberal Democrat"? I think we'd see efficiency and more happiness. I'm all about it.