International Economics

Trade theory is the oldest branch of economics. The positive and normative aspects of trade engaged Mercantilist, Classical and currently Neo-Classical writers on economics. A central concept that was successfully adopted from Classical theory and adapted with Neo-Classical tools is Comparative Advantage (CA), the idea that all countries, regardless of their level of technological development, can unambiguously gain from trade. Paul Samuelson when asked by a hostile journalist to name an idea in economics that was not just common sense dressed up in fancy language replied "The theory of Comparative Advantage; not only is it uncommon sense, it is even counter-intuitive, yet it captures a profound and significant insight." A significant portion of this course will examine the concept of CA. A survey conducted among academic economists in the US in 1996 revealed that 97% of them believed that all countries can gain from free trade. In addition to examining the standard literature, this course will also look at the arguments of the dissenting voices and the basis for their disquiet with the orthodoxy. Subsequent developments within the neo-classical canon, such as market distortions and their implication for trade theory will also be analysed. In addition to the textbook students will be encouraged to read and critique the original articles of some of the most influential thinkers in the history of trade theory.