10 - Public Policy

Summary

The literature on public policy toward MNEs compels an approach different from previous chapters. To describe the policy issues and conflicts arising in each country touched by MNEs' activities would be a hopeless task. Therefore, we employ a telescopic approach that emphasizes not the substantive details of these issues but the behavioral context in which they arise. This chapter follows a two-pronged normative and positive strategy. First, the apparatus of standard welfare economics supplies conclusions about what economic policies will maximize real income. The relevant results, most of them reported in the preceding chapters, are recapitulated in the first section of this chapter. Then we attempt a sketch of governments' dealings with MNEs as political behavior in the context of economic choice. Are there simple models of political economy that can claim any empirical explanatory power? Do they line up with host countries' choices of regulatory regime?

National and International Welfare

The preceding chapters set forth the neoclassical welfare economics of MNEs on the following assumptions: First, each national government seeks to maximize the real incomes of its citizens, taking other nations' policies as given. Second, decisions about distributing that income get made separately from decisions about maximizing the pie to be divided. (We did, however, note some theoretical connections between MNEs' activities and the functional distribution of income.)