International Trade and Economic Growth in Open Economies
Show Less

International Trade and Economic Growth in Open Economies

The Classical Dynamics of Hume, Smith, Ricardo and Malthus

John Berdell

In this enlightening book, John Berdell addresses the widely-held belief that classical economics distanced itself from policy issues and public debates regarding the effects of international trade on economic growth in advanced economies. He argues, through a detailed consideration of the evolution and structure of Hume’s, Smith’s, Ricardo’s and Malthus’ analyses, that it is not only contemporary international economic theory which takes account of these issues.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 8: Classical Political Economy: Back to Their Future?

John Berdell


I The Changing Face of International Economics Had this work been written in the 1970s it would have set out in a very different direction, in good part because international economics has changed considerably in the intervening decades. Many forces have been working towards a reevaluation of trade’s contribution to economic growth, and their joint impact has led to the development of a new theoretical literature on the nature of open economic growth-a ‘new’ growth theory as well as a ‘new’ trade theory. New growth theory represents an important modification of the most popular (Solow) neoclassical growth models in which capital accumulation is essentially self-limiting due to the assumption of diminishing returns to variable factors. The ‘new’ part of growth theory lay in the introduction of various mechanisms that allow capital accumulation to counteract the downward movement in profits by raising productivity. Dowrick (1997) identifies three new growth mechanisms. Capital accumulation may be supposed to increase the flexibility with which capital may subsequently be substituted for other factors. It may create a virtuous cycle in which capital accumulation lowers the cost of making the next generation of capital. Lastly it could exhibit positive externalities (more capital lowers costs elsewhere). These theoretical mechanisms suggest that the openness of national economies may have a profound, if ambiguous, impact upon their growth rates. Thus the point of departure for new trade theory was the relationship between openness and efficiency, a relationship which the similarly named new growth theory had already invested with a...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.