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The economics of Fair Trade: dealing with some criticisms

The economics of Fair Trade: dealing with some criticisms. Mark Hayes Senior Research Fellow in Economics Homerton College, Cambridge. The arguments of the critics. second-best alternative to aid. I 2. I 1. Y. B 2. B 3. B 1. L 2. L 1. L*. The arguments of the critics.

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The economics of Fair Trade: dealing with some criticisms

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  1. The economics of Fair Trade: dealing with some criticisms Mark Hayes Senior Research Fellow in Economics Homerton College, Cambridge

  2. The arguments of the critics • second-best alternative to aid

  3. I2 I1 Y B2 B3 B1 L2 L1 L*

  4. The arguments of the critics • second-best alternative to aid • imposes losses on non-Fair Trade producers

  5. P Elastic demand p0 p1 Q

  6. Key analytical ideas so far • Direct impact: underemployment • Indirect impact: elasticity of demand

  7. The arguments of the critics • second-best alternative to aid • imposes losses on non-Fair Trade producers • prolongs unsustainable dependence

  8. Key analytical ideas so far • Direct impact: underemployment • Indirect impact: elasticity of demand • Dependence: the nature of the household investment decision • Hayes, M. G. (2006). On the efficiency of Fair Trade. Review of Social Economy, 44(4), 447–68. • Hayes, M. G. (2008). A comment on the economics of Fair Trade. World Development, 36 (12), 2953-2961

  9. The arguments of the critics • second-best alternative to aid • imposes losses on non-Fair Trade producers • prolongs unsustainable dependence • can never be more than a niche

  10. Four key analytical ideas to counter the four criticisms • Direct impact: underemployment • Indirect impact: elasticity of demand • Dependence: the nature of the household investment decision • Scale up: Fair Trade embodies principles similar to those needed to reform the international monetary and trading system.

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