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GRAHAM’S THEORY OF INTERNATIONAL VALUES REVISITED: A RICARDIAN TRADE MODEL WITH LINK COMMODITIES

Published online by Cambridge University Press:  03 June 2021

Hideo Sato
Hideo Sato*
Affiliation:
Hideo Sato: Tohoku University, Japan.
*
*Corresponding author. E-mail: hideo.sato.e1@tohoku.ac.jp
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Abstract

Frank D. Graham (1890–1949) presented an innovative multi-country, multi-commodity trade model that attached great importance to link commodities and quantity adjustments, not perfect specializations and price adjustments as emphasized by John Stuart Mill and Alfred Marshall. However, due to some shortcomings, this model was not sufficiently understood and has been forgotten. This study reconstructs Graham’s theory of international values by rectifying the shortcomings. Through this reconstruction, the following is clarified. First, in multi-country, multi-commodity trade models, the existence of link commodities is general and perfect specializations seldom appear; therefore, quantity adjustments are normally performed in the face of demand shifts. Second, notwithstanding unchanging sectoral productivity at a national level, national wage rates can vary greatly according to the patterns of the international division of labor. Third, while the domestic relative wage rate increases with an increase in a home country’s productivity of link commodities, it does not increase with an increase in the productivity of commodities produced only in the home country.

Type
Articles
Information
Journal of the History of Economic Thought , Volume 43 , Issue 2 , June 2021 , pp. 193 - 218
Copyright
© The History of Economics Society, 2021

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Footnotes

I would like to thank Kazuhiro Kurose (Tohoku University), Yoshinori Shiozawa (Osaka City University, Professor Emeritus), and anonymous referees for their useful suggestions and helpful comments. Further, I would like to thank Enago for their English-language review.

This work was supported by JSPS KAKENHI Grant Number JP 18K01560.

References

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