The Theory of International Trade

by Horvat, B.

• ISBN13: 9780333734094
• ISBN10: 0333734092
• Format: Hardcover
• Copyright: 1999-03-08
• Publisher: Palgrave Macmillan

Summary

This book seeks to develop an alternative paradigm of the theory of international trade. The mainstream neoclassical theory, which is based on the Hecksher-Ohlin-Samuelson theorem, is shown to be both logically contradictory and to fail to explain the real world. This theoretical and empirical refutation justifies the search for a new approach. Branko Horvat's approach is based on applying and developing the theory of value, to develop an approach which starts by analysing the economic system rather than with the behaviour of individual agents. The result is a systemic approach to international trade, developed in a concise, clear and empirically relevant way.

Author Biography

Branko Horvat was born in Petrinja, Croatia. As a boy he participated in the partisan guerrilla against fascist invaders, and was then educated in economics, philosophy and sociology at Zagreb University, London School of Economics and Manchester University, where he took his second doctorate. He completed his post-doctoral studies at the Massachusetts Institute of Technology and Harvard University. He held fellowships at Manchester University, Ford Foundation and Fulbright. He has been Chief Methodologist at the Federal Planning Bureau and a Member of the Federal Economic Council. He was Founder and Director of the Institute of Economic Sciences and Founding Editor of Economic Analysis. He was also Founding President of the International Association for the Economics of Participation. He has been adviser to several governments, and guest professor at a dozen universities, including Cambridge, Paris, Michigan, Yale and Berkeley. His work has been translated into fifteen languages.

Table of Contents

List of Figures	p. viii
Preface	p. ix
List of Symbols	p. xiv
List of Abbreviations	p. xvi
Introduction	p. 1
The Mainstream International Trade Theory
The Evolution of International Trade Theory	p. 7
The Heckscher-Ohlin Theory	p. 10
Preliminaries	p. 10
The Heckscher-Ohlin Theorem	p. 12
The Factor-Price Equalization Theorem	p. 15
The Stolper-Samuelson Theorem	p. 21
The Rybczynski Theorem	p. 22
Critique	p. 24
The validity of underlying assumptions	p. 24
The validity of neoclassical economic theory	p. 27
Empirical evidence	p. 28
The Evaluation of the Heckscher-Ohlin theory	p. 29
Appendices to Part I	p. 32
Empirical evidence	p. 32
Leamer's attempt at reconciliation of the theory with facts	p. 33
The Systemic Theory of Value
Diachronic vs Synchronic Labour Input: The Two-Century Old Misunderstanding	p. 39
The Employment Effect	p. 42
The Replacement Effect	p. 45
The Interplay of Employment and Replacement Effects	p. 50
The Traverse	p. 54
The Basic Three-Industry Model
Steady State	p. 59
Integrated world economy	p. 59
Open economy	p. 62
Growing economy	p. 63
The Wage-Rental Curve	p. 67
Appendix to the Part III	p. 70
A note on price movements	p. 70
An Alternative Theory
Three Models	p. 75
The two received models	p. 75
An alternative model of international trade	p. 77
Comparative advantage	p. 79
Intra-Industry Trade	p. 82
Four Hypotheses	p. 85
Comparative advantage hypothesis	p. 85
Two commodities	p. 85
Many commodities	p. 88
Equalization of factor prices hypothesis	p. 89
Hypothesis about the changes due to the opening of trade	p. 90
Increased factor supply specific effect	p. 92
The Gains from Trade
The Pattern of Specialization	p. 95
Given autarkic prices	p. 95
Primary and secondary specializations	p. 99
The Gains from Trade	p. 104
Autarky vs. trade	p. 104
Domestic and international prices	p. 106
Import and export gains	p. 108
Wage-rental curve again	p. 111
Unequal Exchange	p. 116
Marxian values	p. 116
Unequal exchange I	p. 118
Unequal exchange II	p. 120
Tariffs
Tariffs and Subsidies	p. 125
Effects of a tariff in a single market	p. 125
Prohibitive tariff and subsidy	p. 127
The pattern of specialization with tariff	p. 127
Nominal and effective tariffs	p. 129
Subsidies	p. 132
Infant industry support	p. 133
Customs Union	p. 136
Degrees of economic integration	p. 136
Trade creation and trade diversion	p. 137
Customs unions in a more realistic setting	p. 140
Dynamic effects	p. 144
Appendices to Part VI	p. 150
Empirical evidence	p. 150
Economic integration of Eastern Europe: The Project Bridge	p. 155
Introduction	p. 155
The Organization	p. 160
The Customs Union	p. 162
The Monetary Union	p. 172
Notes	p. 190
References	p. 192
Name Index	p. 197
Subject Index	p. 199
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