What Do Producers Want? On the Origins of Societal Policy Preferences

Abstract

In most studies of foreign economic policy, scholars derive the policy preferences of societal actors by using economic theories to determine the returns from various government actions. These policy preferences are then used as independent variables in explaining political outcomes. However, often a number of different policies serve the actor's underlying preference (such as maximizing profit) and, therefore, in order to determine the actor's policy preferences, additional information must be brought in. By examining producer policy preferences for trade, exchange rate and foreign direct investment policies, the article shows the inadequacy of focusing only on economic returns. Producers make a cost-benefit calculation when deciding what policies to support. Some recent literature has examined how actors perceive the benefits from various policies while others have investigated the costs of seeking these policies (namely, collective action obstacles). Estimating expected utility requires analyzing the perceived likelihood of obtaining various policies and these expectations are a function of domestic political variables. Political structures, then, affect not only how much influence groups have, but also what policies they seek in the first place.