In this, his second edition, Miroslav Jovanović has improved and elaborated on his already comprehensive work on the economics of integration, passing from customs unions to common markets to full economic integration. The most distinctive aspect of his treatment continues to be his own creative union of theory and applied material. For him, theory is no abstract game played for the amusement of the players, but a tool for enlightening our understanding of what we see in the world around us. For him, the major interest resides always in the problems created by working out various forms of union in real situations.
Thus, theoretical and applied considerations are blended from the outset. After a brief, stage-setting, introductory chapter, Chapter 2 deals with customs unions, with an shorter concluding section on free trade areas. The chapter begins with the static, partial-equilibrium analysis of tariffs and customs unions and goes on to consider general equilibrium analyses. Even here, however, we find discussions of the European Union’s Common Agricultural Policy (CAP), employment policies, national security objectives, infant industries, bilateral and unilateral tariff reductions.
The analysis of tariffs and customs unions is followed by a brief consideration of subsidies. The theory is presented first, followed by a discussion which covers, among other things, the GATT (General Agreement on Tariffs and Trade) position on subsidies and countervailing duties, political issues in the choice between subsidies and tariffs, procurement policies, output and export subsidies, and the American DISC (Domic International Sales Corporation) policy.
In the section entitled ‘Dynamic Models’, we find nothing about non-linear dynamics, chaos theory, self-organizing systems or evolutionary biology. Instead, we read about competition in technological advance, intra-industry trade, the EC’s competition policy, the case for state intervention in non-competitive markets, scale economies in various industries, predatory pricing, and pre-emptive investment. In line with the growing interest of economists in technological change at the microeconomic level the section on competition in innovation has been greatly expanded in this new edition.