International and Interregional Economics


In this part of the book I am concerned primarily with the factors thatdetermine the distribution of output among nations. I have depended to a substantial degree upon the British classical school, which contributed so much to the development of the theory of international trade. Because Smith, Ricardo, Mill, and the others present their views so much better than I can and because I should like to give the reader the flavor of their writings, I have in this part and to some extent in the next part quoted passages from the writings of the major figures. The reader should not, however, view this book as a book of readings, for actually only about 10 per cent of the book consists of quotations.

Part One includes seven chapters. The first is devoted primarily to a long excerpt from Adam Smith Wealth of Nations (1776), for it was Adam Smith more than anyone else who put across the principles of free trade. Indeed the time was ripe, for the world was weary of the minute interferences of the mercantilist system, and Locke, Hume, and the Physiocrats, among others, had provided the philosophical foundations for a free system. The importance of Smith lies in still another direction; namely, he argued for free trade as a means of obtaining the best allocation of economic resources. He was at great pains to show that the individual secures a much more effective allocation of his resources than could be achieved through meddling by the State. Interference, moreover, would also reduce the gains to be associated with the distribution of resources and abilities among nations.

Early in the nineteenth century Ricardo, the successful stockbroker turned economist, the economist who alone impressed the brilliant essayist De Quincey as a first-rate mind among economists, and probably the most acute mind in the history of economics, contributed greatly to the acceptance of a modern theory of international trade. Some authors, Schumpeter, for example, tend to underestimate the contributions of Ricardo and to overestimate those of his predecessors. It is true that Torrens, before Ricardo, had introduced the theory of comparative costs. But Ricardo, more than anyone else, won acceptance for the theory of comparative costs, the foundation of the theory of international trade. Under the most simplified assumptions Ricardo showed that two coun-

Additional information

Publisher: Place of publication:
  • New York
Publication year:
  • 1957


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