More Games of Chicken

First off, the "Game of Chicken" is actually an economic model!

But this post is about how the impostion of a tariff is related to chicken,  againHarry Johnson taught us in the 1950s that its quite likely that the imposition of a tariff may not improve the welfare of a country — if other countires retaliate (and guess what, the ususally do). His analysis is presented in Figure 7.2 of International Economics. 

Now why would Obama impose a tariff if his advisors are well aware of Harry Johnson's work? (Hint: think about the economics of who is gaining and loosing, and the realities of political support)

Leave a Reply

Your email address will not be published.