This paper examines to what extent price equals social cost on a particular liner trade route: that between the east coast of the United States and the west coast of South America. On this route there are significant differences between the present price of liner services and the cost of an efficient service. In a significant portion of the trade, the differential between price and the cost of an efficient transport system is larger than typical values of the tariff barriers. It is argued that, if this differential were decreased or removed, not only would there be a substantial increase in world wealth but also it is likely that the greater part of the increase would accrue to the developing countries involved. The authors ascribe the observed inefficiencies to the cartelisation of this trade by the conference system. However, at least on this route, the inefficiencies do not take the form stated in most criticisms of the conferences. On this route, the conference system decreases the real income of the developing countries involved, not by decreasing the volume of their exports or the profits obtainable from exports, but rather by increasing to inefficient levels the prices of imports. This finding, if it is generally applicable on other routes, has some very serious implications for what constitutes rational and effective policies toward the conferences on the part of the developing countries.

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  • Supplemental Notes:
    • Study initiated by MIT Commodity Transportation Laboratory, Room 5-326, MIT, Cambridge, Massachusetts 02139, Project Number MITCTL 72-1.
  • Corporate Authors:

    London School of Economics and Political Science

    Houghton Street, Aldwych
    London WC2A 2AE,   England 
  • Authors:
    • Devanney III, J W
    • Livanos, V M
    • Stewart, R J
  • Publication Date: 1975-5

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Filing Info

  • Accession Number: 00098626
  • Record Type: Publication
  • Source Agency: London School of Economics and Political Science
  • Files: TRIS
  • Created Date: Oct 13 1977 12:00AM