A Warning: Three Commodities and Three Factors

Abstract

It was pointed out earlier that with more than two factors the concept of factor intensity breaks down; furthermore, in the section on tariffs it was argued that in going from no trade to free trade the wage of the scarce factor is reduced, but this too is dependent upon the concept of factor intensity. The Rybczynski theorem also makes reference to factor intensity, as do many arguments of the Leontief paradox. Growth has been analysed in a 2 × 2 × 2 world. It is most important for the student to be aware that in the field of international trade the generalisation to more than two goods or two factors reduces the significance of many of the former theorems.