Principles of Economics- Mankiw (5th) 525

Principles of Economics- Mankiw (5th) 525 - CHAPTER 24...

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CHAPTER 24 PRODUCTION AND GROWTH 543 times led policymakers in less developed countries to impose tariffs and other trade restrictions. Most economists today believe that poor countries are better off pursuing outward-oriented policies that integrate these countries into the world economy. Chapters 3 and 9 showed how international trade can improve the economic well- being of a country’s citizens. Trade is, in some ways, a type of technology. When a country exports wheat and imports steel, the country benefits in the same way as if it had invented a technology for turning wheat into steel. A country that elimi- nates trade restrictions will, therefore, experience the same kind of economic growth that would occur after a major technological advance. The adverse impact of inward orientation becomes clear when one considers the small size of many less developed economies. The total GDP of Argentina, for instance, is about that of Philadelphia. Imagine what would happen if the Philadelphia City Council were to prohibit city residents from trading with people
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