Government enacts a welfare- reducing policy

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(a) In problem set 6, you demonstrated (hopefully) that allowing international sales in the U.S. increases consumer welfare by more than producer welfare falls. Thus, steel tariffs on international imports are welfare reducing. Yet the steel industry is successful in lobbying for steel tariffs. Referencing the class on political economy, what explains why the government enacts a welfare- reducing policy?

(b) Big steel firms were initially against the steel tariffs, despite the fact that they would seem to benefit from higher domestic steel prices. Later, they change their stance to favor steel tariffs. later favored steel tariffs. What might explain why they weren't in favor of steel tariffs throughout the period?

Reference no: EM131523732


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