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Political Goods and Trade Theory

rather than appending them to the conclusions of the existing "perfect competition" based theory. Johnson's 1965 paper "A Theory of Protection ism, Tariff Bargaining and the Formation of Customs Unions" [6] made a significant step in this direction by recognizing the importance of a preference for industrial production in the trade policy of many countries. This paper seeks to extend Johnson's analysis. Part I suggests the concept of Political Goods as an analytically convenient way to characterize the differences between the preferences of the community and those of the public decision makers. Part II discusses two particular political goods which are often found in the trade policy, adding to the preference for industry a desire to maintain the size of individual firms. The implications of these in some areas of trade policy are considered in Part III.