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Economics of international trade

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New perspectives on economic development

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Abstract

The history of the development of the theory of international trade is an interesting one. It is not unusual to conceive that economists would first develop a theory of exchange based on two individuals of the same country and then applies the theory to international transactions.59

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Notes

  1. 1.

    Strictly speaking, it is neither possible nor essential to distinguish the theory of international trade with the theory of domestic trade (Haberler 1961: 55). As will be seen, my criticisms on neoclassical international trade theories can well be applied to the general theory of exchange.

  2. 2.

    It has been claimed that Robert Torrens deserves the credit for discovering the law of comparative advantage in his Essay on the External Corn Trade (1815). Ruffin (2002: 727—748) argues that though Torrens pointed out that absolute advantage may not enable us to decide whether a good would be imported, ‘his statement of comparative advantage was too incomplete for easy scientific reproducibility’.

  3. 3.

    For a historical account of the development of the neoclassical theory of international trade, see Haberler (1961) and Gomes (1990).

  4. 4.

    Austrian economists generally argue that international trade theory should not be separated from general trade theory. In Murray Rothbard(s view, ‘international trade’ is just a practical example of the ‘general theory of trade’ (See Machaj 2004).

  5. 5.

    This is evidenced by the fact that the discussion of the theory of international trade does not appear in Von Mises (1949) nor Rothbard (1993). Neither it is included in the basic Austrian economics textbooks such as Shand (1984) and Reekie (1984) nor in the three volumes of Austrian economics readings edited by Littlechild (1990). In a recent article, Gunning (2003) discusses the concept of praxeological entrepreneurship in the global economy.

  6. 6.

    For a discussion of some shortcomings of economic aggregation, see Reekie (1984: 56–61).

  7. 7.

    Cheung (1987: 129) comments that the fate of the two major theories developed in the 1950s, namely economic development and international trade are different. While the theory of economic growth is largely abandoned due to its absurdity, the theory of international trade gains high respects among the economists.

  8. 8.

    For some historical accounts of integration of Schutz(s subjectivist approach into Austrian economics, see Prendergast (1986), Pietrykowski (1996) and Koppl (1997).

  9. 9.

    For an account of the method of Austrian subjectivism, see O(Driscoll and Rizzo (1985); Yu (1999; 2001a).

  10. 10.

    For an account of the socio-economic approach, see Etzioni and Lawrence (1991).

  11. 11.

    The subjectivist approach does not stress knowledge itself, but rather what people know about knowledge. This approach focuses on the kind of knowledge about which people know nothing at all. It follows that ‘things about which men are completely ignorant are things that simply do not exist’ (Kirzner 1979: 138). See also Yu (2001a: 47–63).

  12. 12.

    For a further discussion of the Sino-British conflict, see Yu (2003: 76–78).

  13. 13.

    Adopted from De Soto (1995: 228–253). Using simple stickmen as an illustration, De Soto is able to demonstrate the essence of Austrian entrepreneurial process.

  14. 14.

    White (1976: 4) argues that Kirzner does not distinguish arbitrageurship from entrepreneurship.

  15. 15.

    For a review of Schumpeterian and adaptive of entrepreneurship, see Yu (1997).

  16. 16.

    For a discussion of OEM, see Yu (1997).

  17. 17.

    The new institutional school argues that a state is formed to reduce transaction costs through the evolution of property rights (see North 1990).

  18. 18.

    According to Stanley Fischer et al. (2003: 45), the functions of the IMF are: (1) undertaking surveillance of the global economy and the economies of its members; (2) providing technical assistance to its members; (3) providing the machinery for consultation and collaboration on international monetary problems and (4) lending to its member countries.

  19. 19.

    Schutz (1970: 80) argues that the world of knowledge is incoherent, only partially clear and not free from contradiction.

  20. 20.

    For a subjectivist explanation of institutional change and organizational inertia, see Yu (2001b: 217–236).

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  1. Department of Economics and Finance, Hong Kong Shue Yan University, Hong Kong, China

    Fu-Lai Tony Yu (Professor)

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Yu, FL.T. (2011). Economics of international trade. In: New perspectives on economic development. Wageningen Academic Publishers, Wageningen. https://doi.org/10.3920/978-90-8686-716-5_6

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