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Is There Progress in Economics?

Knowledge, Truth and the History of Economic Thought

Edited by Stephan Boehm, Christian Gehrke, Heinz D. Kurz and Richard Sturn

This thought-provoking book discusses the concept of progress in economics and investigates whether any advance has been made in its different spheres of research. The authors look back at the history, successes and failures of their respective fields and thoroughly examine the notion of progress from an epistemological and methodological perspective.
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Chapter 15: The 'institutional factor' in the theory of international trade: new vs. old trade theories*

Knowledge, Truth and the History of Economic Thought

Sergio Parrinello


15. The Ôinstitutional factorÕ in the theory of international trade: new vs. old trade theories* Sergio Parrinello INTRODUCTION In the development of the pure theory of international trade, from the late 1960s up to the present day, the following directions of theoretical work appear prominent. Until the late 1970s we find: 1. The dimensional issue: a. beyond the dimensions of the 2 ´ 2 ´ 2 model.1 b. reappraisal and criticism of the HeckscherÐOhlin, Samuelson, Rybcyznsky theorems from the point of view of capital theory.2 Theories with exogenous limits imposed on distributive variables and equilibrium unemployment: a. neo-Marxian and neo-Ricardian models.3 b. neoclassical models in which rigidities in distributive variables are subsumed under the theory of Ômarket distortionsÕ.4 2. After the 1970s other main directions emerged and can be grouped under the following headings: 3. 4. Trade theory with external economies, increasing returns, imperfect competition, location-agglomeration theory.5 Trade theory in which the Ôinstitutional factorÕ is assumed to be endogenous.6 A terminological clarification is necessary. In this chapter (3) and (4) are called the Ônew trade theoryÕ, although in the current literature this expression is used to denote mainly (3). ÔOld trade theoriesÕ include both RicardoÕs classical approach and HeckscherÐOhlinÕs neoclassical trade theory. Furthermore the term Ôinstitutional factorÕ will be used as a catch-all term to encompass concepts such as institutions, social norms, laws, rules, standards, conventions, customs and political agencies. 256 The Ôinstitutional factorÕ in international trade 257 The new trade theory represents novel perspectives compared with...

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