Context: I'm an econ. undergrad and I'm currently in my first year doing basic General Equilibrium analysis from a Ricardian framework. I found the basic arguments presented in favor Free Trade to be unconvincing. The basic case as presented goes as follows: for any two countries, engaging in trade will always result in a pareto improvement due to the countries having different comparative advantages (i.e. different MRS for production possibilities). Two main critiques of free trade were presented in the lecture: Distributional issues - shifting wealth from owners of labour to owners of capital, or leading to rising inequality (concretely the Heckscher-Ohlin model). Neo-classical answer: lump-sum taxation (second welfare theorem) Dynamic Comparative Advantage - countries becoming banana republics due to specialization in goods with poor long-term prospects. Neo-classical answer: tackle imperfect capital markets, do not restrict trade. While broadly acceptable w.r.t. developed countries, I feel both of these arguments fail on being descriptive of real-life situations faced by developing countries - the main linchpins of the free trade argument. They assume that in developing countries people generally act in a market established by functioning legal and political institutions. As a prime example, lump-sum taxation is something that is simply not possible for multiple reasons: lack of information, lack of political support, no social and legal institutions in place to enact it. In other words, it is not a valid response to the critique. Imperfect capital markets is an equally dysfunctional argument - one cannot simply establish them by postulating it as an economically preferable institution. Furthermore the issue ignores the power relations inherent in these interactions - large multi-national companies often hold political and economic power in a way that prevents even a perfectly functional government to create economic policy beneficial in the long-term. Finally, I think that historically speaking there is substantial evidence for countries developing under protectionist policies. The main example is England upto 1843, the United States long until late 19th century and during the interwar period and East Asia in the latter half of the 20th century. All of these countries engaged in infant industry protection and tariffs to high economic benefit. I would also argue that the reason why England and the US were able to engage in free trade in the late 19th century - the period in history most often identified as the hey-day of free trade - was because they were the leading industrial powers of their times and thus didn't have to worry about the concerns laid out above. That is not to say that free trade is always bad or even mostly bad - rather that there is much more to the argument about free trade than "it's always beneficial for all of the parties involved". I would love to hear some solid responses - with the vast majority of economists promoting blanket promotion of free trade there must be something I'm missing here!

As we can see, our friend here is a budding instituionalist, my R1 gives historical context to early developmental economic theory and their assumptions, much credit goes to Roger Backhouse. Now here is my R1:

Empirical real world experience. In the 1960's their was a resurgence of neoclassical developmental economics. Many of the assumptions made during the 1950's by institutional economics turned out not to be justified. Poor countries were able to achieve high rates of savings and per capita income growth thought impossible prior. Second,the success of countries such as Taiwan and South Korea destroyed the "export-pessimism" of early structural (institutional) economists. Third was the failure of planning and "import-substitution" in many countries. Early post wwII economic growth models such as Harrold-Domar model which equated GDP growth to Marginal Propensity to Save(S)/ Captial Output Ratio(K) (Hence the conclusion being large public investments) were discredited due to the failure of large public projects, the targets set out were not achieved. Neoclassical criticism was directed at the use of planning an economy or industry as a whole, neoclassical economists argued that the failure of the institutionalists was due to their focus on the wrong things. Consider the example of whether to build steel plants in a developing country. An Institutionalist would argue that such plants would reduce dependence on imports, and to decide how many plants to build it would be necessary to work out how much steel would be demanded by other sectors of the economy. The neoclassical approach would be to observe that steel can be bought and sold on the world market. Meaning that if our country can make steel cheaply enough for building steel mills to be profitable, they should be built, any surplus steel being sold on the world market. If such plants would be unprofitable, it would be more efficient to continue relying on imports.

To further elaborate, Early developmental economists in the 1950's argued against foreign trade. The reason was that poor countries produced goods for which the income elasticity of demand was very low: (as income for rich countries rose, demand for goods produced by these poor countries would rise slowly). In addition, substitutes were introduced for these agricultural products (rubber, cotton ect). Slow growth in demand means limited scope for earnings from exports. Some economists (Hans Singer & Raul Prebisch) went further and said due to prices of industrial goods rising faster than raw materials, poor countries would face being able to purchase less and less as time progressed. It was theorized, that rising productivity growth in rich countries led to higher wages, while in poor countries; falling prices ( trade moving in favor of rich countries). Low incomes in poor countries mean reduced savings, the also much of the savings were assumed to be eaten up by population growth to maintain living standards. Arthur Lewis's growth model (Lewis 1954) broke down a development country's economy into 2 sectors. A backwards agricultural sector with a surplus of labor and an MPL of zero, and an advanced industrial sector. Growth occurs when investment takes place in the industrial sector, raising demand for labor and wage and so on. The key is the investment. Hence the idea of a "big push' or industrialization (Nurkse & Scitovsky) Either foreign aid or planing.