Monday, December 13, 2010

National Interests and Trade Restrictions: The Case of Kosovo and Serbia

This article uses economic theory to one more time expose the fallacies behind interventionist policies that prevent free flow of products across administrative borders of any kind. The example used to illustrate these points is the case of Serbia and Kosovo. We use the basic postulates of exchange theory to derive the logical consequences of a possible complete trade ban between the two populations. The consequences, including diminished productivity, capital destruction and siphoning of resources into the hands of few politically privileged individuals, would be unfavourable for most inhabitants in both countries. These consequences would not provide a good environment for a reduction of political tensions between Serbia and Kosovo but rather deepen the crisis.

You can read the complete article here.