Interest Groups and Collective Action

This book has so far (with the aid of a simple model) shown, on the one hand, what an optimal situation looks like from a welfare point of view and, on the other hand, why common economic policy interventions — not least in foreign trade — often tend to reduce potential welfare. (We have also looked into situations where interventions can increase welfare.) Moreover, we have given examples of policy-generated distortions. In the rest of the book we will try to explain why it is so common for the state to pursue ‘wrong’ economic policies. When we do this we will use economic theory, not only to show in what way the policies are ‘wrong’ but also why they go wrong.