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Module 10 | Session 2 | Free trade vs Regulations
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In this session we go through a passage by the economist who developed the theory of 'opportunity cost'.

Anupam Mishra is teaching live on Unacademy Plus

Anupam Mishra
Batch of 2018 IIM Lucknow || Former Verbal & Quant Faculty || Loves Philosophy || Trekker || Enfield enthusiast || Powerlifter

U
Unacademy user
thankqq sir for all this useful lesson for us
  1. Reading Comprehension For the CAT The Genre Series Module 10 Session 2 Free trade vs Regulations A Course By: Anupam Mishra


  2. Structure & flow of Sessions. Reading the Passage Para-wise Summary Central Idea Word- meanings No specific Questions to be solved (Shall have a separate course for that)


  3. Some Quips about the Passage O Passage part of: Economic Sophisms' O Was a French economist and a writer. O Was a member of the French Liberal Society and also that of the French National Assembly O Developed the economic theory of opportunity cost. O Among his many works in the field of Economics and Political Economy, his most renowned work is The Law originally published as a pamphlet. It describes what can be considered as a just system of law and how does it lead to Free Society O "In short, is not liberty the freedom of every person to make full use of his faculties, so long as he does not harm other persons while doing so?" Author Fr d ric Bastiat


  4. The Passage (part 1) We cannot wonder enough at the facility with which men resign themselves to continue ignorant of what it is most important that they should know; and we may be certain that such ignorance is incorrigible in those who venture to proclaim this axiom There are no absolute principles. You enter the legislative precincts. The subject of debate is whether the law should prohibit international exchanges, or proclaim freedom. A deputy rises, and says: If you tolerate these exchanges, the foreigner wi inundate you with his products: England with her textile fabrics, Belgium with coals, Spain with wools, Italy with silks, Switzerland with cattle, Sweden with iron, Prussia with corn; so that home industry will no longer be possible.


  5. The Passage (part 2) Another replies: If you prohibit international exchanges, the various bounties which nature has lavished on different climates will be for you as if they did not exist. You cannot participate in the mechanical skill of the English, in the wealth of the Belgian mines, in the fertility of the Polish soil, in the luxuriance of the Swiss pastures, in the cheapness of Spanish labour, in the warmth of the Italian climate; and you must obtain from a refractory and misdirected production those commodities which, through exchange, would have been furnished to you by an easy production. Assuredly, one of these deputies must be wrong. But which? We must take care to make no mistake on the subject: for this is not a matter of abstract opinion merely. You have to choose between two roads, and one of them leads necessarily to poverty. To get rid of the dilemma, we are told that there are no absolute principles. This axiom, which is so much in fashion nowadays, not only countenances indolence, but ministers to ambition.


  6. The Passage (part 3) If the theory of prohibition comes to prevail, or if the doctrine of free trade comes to triumph, one brief enactment will constitute our whole economic code. In the first case, the law will proclaim that all exchanges with foreign countries are prohibited; in the second, that all exchanges with foreign countries are free; and many grand and distinguished personages will thereby lose their importance. But if exchange does not possess a character which is peculiar to it- if it is not governed by any natural law,--if, capriciously, it be sometimes useful and sometimes detrimental,- if it does not find its motive force in the good which it accomplishes, its limit in the good which it ceases to accomplish,-if its consequences cannot be estimated by those wh effect exchanges;-in a word, if there be no absolute principles, then we must proceed to weigh, balance, and regulate transactions, we must equalize the conditions of labour, and try to find out the average rate of profits-a colossal task, well deserving the large emoluments and powerful influence awarded to those who undertae it.


  7. Para-Summaries Paragraph -1 O Starts with how conveniently men embrace ignorance, especially the ones that believe in the absence of absolute principles. Then, introduces the International exch. Vs Free trade' debate. Ends para with speaking against Free trade. Paragraph 2 O Here he takes the other point of view, saying that the prohibition would result in extreme inefficiencies & an overall loss for all. Furnishes many examples. Asserts that either of the 2 opinions ought to be wrong. Ends with commenting on the absence of absolute principles' point.


  8. Para-Summaries Paragraph 3 O Talks of the consequences of either of the 2 principles being implemented. Stating how it will result in many grand personages losing their significance. Paragraph 4 O Considers the case where none of the 2 principles are implemented in an absolute sense cause of the absence of any absolute principles. In such a scenario these 'grand personages' who shall be regulating the balance b/w free trade & prohibition will be entitled to 'emoluments' owing to this service of theirs.


  9. Central Idea of Passage P1: Starts with how conveniently men embrace ignorance, especially the ones that believe in the absence of absolute principles. Then, introduces the 'International exch. Vs Free trade' debate. P2: Here he takes the other point of view, saying that the prohibition would result in extreme inefficiencies & an overall loss for all. Furnishes many examples P3: Talks of the consequences of elther of the 2 principles being implemented. P4: Considers the case where none of the 2 principles are implemented in an absolute sense cause of the absence of any absolute principles. The author has extremely articulately & in a nuanced manner put forth how the non-existence of a general principle that governs trade will benefit those who are in the business of regulating it.


  10. Word-meaninas (Contextual) O Incorrigible O Precincts O Inundate O Refractory O Countenances O Indolence O Ministers O Capriciously O Colossal O Emoluments Incurable, Difficulf fo be reformed or changed Area belonging to a particular field Overwhelm someone with unwanted things Unmanageable & inefficien Supports or approves Laziness Administer, carry out In an unstable or volatile way Huge, enormous Profits, salary, fee