Capital Goods and the Pure Theory of Trade

Abstract

Although the pure theory of trade has become a large and highly specialised branch of economics, the thoughtful student will be aware that, in principle, it constitutes no more than an application of the general theory of value, distribution and resource allocation. It follows at once, of course, both that each possible approach to general economic theory has its corresponding theory of trade and that any changes or developments in general theory must have implications for the theory of international trade. The purpose of this chapter is to introduce the student to the trade theory implications of certain debates over value, distribution and capital goods which flourished in the 1960s, following the publication of Piero Sraffa’s Production of Commodities by Means of Commodities (1960).