A Brief History of International Trade Thought: From Pre-Doctrinal Contributions to the 21st Century Heterodox International Economics

By Dorobat, Carmen Elena | The Journal of Philosophical Economics, Spring 2015 | Go to article overview

A Brief History of International Trade Thought: From Pre-Doctrinal Contributions to the 21st Century Heterodox International Economics


Dorobat, Carmen Elena, The Journal of Philosophical Economics


Introduction

For centuries, international trade in goods and services, and the development of the international division of labor have constituted a focus point of study for economists and philosophers alike. Research in this field usually revolves around three main lines of inquiry (Wu 2007): (a) what are the causes of international trade? (b) what are the effects of international trade?, and given these two aspects, (c) is government intervention in international trade necessary or beneficial? Broadly speaking, the first two questions belong to economic theory, while the latter is concerned with economic and trade policy. Nevertheless, between the two areas there is no clear-cut separation: economic theory influences economic policy, and by the same token, political decisions and ideological trends leave an imprint on the conceptual foundations of economic theory (Irwin 2002). The present paper provides a short overview of how the answers to these three questions have evolved alongside the development of economic theory. We shall follow filiations of ideas in a chronological order, investigate the assumptions and methodological presuppositions of the main theories, as well as highlight occasionally the influence of politics on the progress of these ideas. To this end, the first section maps the pre-doctrinal contributions to trade theory, from the Ancient Greek writings to the Physiocrats. The second section follows the development of international trade theories in Britain and France over the 19th century, while section three analyzes its separation into multiple schools of thought throughout most of the 20th century. Section four then concludes with an investigation of the most important contributions to trade theory after 1990 and up to the present day.

Pre-doctrinal theoretical contributions

Up until the Middle Ages, philosophers and theoreticians did not undertake any systematic study of international trade, and early theories are rather fragmented, laced with ethical and political considerations. Within this pre-doctrinal period, four subsequent periods can be delineated: Ancient Greek thought, scholastic and Christian thought, mercantilism, and Physiocracy.

The most important ideas concerning international trade in Ancient Greek thought are found in the works of Plato, Xenophon, and Aristotle. They analyzed the effects of the division of labor and of voluntary exchange of goods, and considered them to be beneficial to both parties involved in the transaction. In 380 BC, in The Republic, Plato discussed the practical impossibility of self-sufficiency for a city state, and explained that the division of labor brings about a higher productivity and higher output than autarky, as well as allows individuals to specialize according to their natural aptitudes and available natural resources (Plato 1930). In 340 BC, Xenophon, in following Plato, also mentioned the benefits of the price arbitrage carried out by traders in search of profit, as well as the advantages of larger, international markets for the merchants of the Greek city states (Xenophon 1918). Notwithstanding these considerations, the Greeks did not declare themselves in favor of international commercial relations. As one example, around 350 BC, Aristotle was already arguing in Politicsfor a certain degree of economic self-sufficiency-in fact, as high as possible. For Aristotle, this self-sufficiency was necessary to limit not only foreign commerce, but also any unwanted contact with foreigners (Aristotle 1932). Thus, he argued, part of the city rulers' duty was to decide which exports and imports are absolutely necessary, and furthermore, to insure the fairness of these exchanges through some type of commercial treaties with other cities.

Aristotelian philosophical ideas constituted the foundation for the development of scholastic and Christian thought between the 13th and 15th centuries, and this intellectual legacy made it possible for economic science to be born first as a peripheral branch of ethics. …

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