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Refuting Criticisms on Fair Trade Economics

Explore the economic arguments against Fair Trade and analyze key counterpoints to address criticisms surrounding aid alternatives, producer losses, and sustainable development. Learn how Fair Trade principles align with global reform needs.

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Refuting Criticisms on Fair Trade Economics

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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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