This is a podcast from the archives of the BBC Reith Lectures. This lecture in the series,

Innocence and Design, given by David Henderson, was originally broadcast in 1985.

The gulf between orthodox economic thinking and the intuitive notions of do-it-yourself economics

is widest in the sphere of international economic relations in general and trade policies in particular.

The professionals and those who think like them are very much in a minority.

Perhaps the sharpest difference between minority and majority is in their respective

conceptions of where national interests lie in international trade.

Let me illustrate this first with reference to official policies towards exports.

This is a subject on which DIYE is ambivalent.

As I mentioned in my last lecture, it considers that for products which are labeled as essential,

such as oil or gas in situations of perceived scarcity, exports should be prohibited however much foreigners are prepared to pay for them.

But more typically, it takes the opposite view, that exports represent a benefit to the economy,

even if foreigners are only prepared to pay less than it costs to produce them.

Essentialism fades into the background.

Instead, the dominant idea is that of traditional mercantilism.

The centuries-old belief that any reduction in imports or increase in exports will necessarily benefit the economy

by improving the balance of payments and creating

or safeguarding employment. In consequence, DIYE thinking favours the use of export subsidies,

both direct and indirect. But as in the case of export restrictions on oil, various international

agreements to which Britain's a party place limits on the extent to which such subsidies can be used.

There are provisions of the Treaty of Rome which apply to members of the European community.

There are the relevant articles of the General Agreement on Tariffs and Trade, the GAT,

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