AbstractThis note looks at Smith's critiques of bounties (read “subsidies”) on exports. Smith's analysis of bounties foreshadowed the basic trade policy framework of distortions and noneconomic objectives. While Smith did not develop the theory of distortions, he captured the logic of the theory of noneconomic objectives and actually ranked policy alternatives based upon their relative social costs. Corden (1957) first ranked tariffs versus production subsidies within a noneconomic objectives framework, and Johnson (1960) first used the term in its modern sense, but the formulation of the general framework lies with Smith.
