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Samuelsonian Economics and the Twenty-First Century$
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Michael Szenberg, Lall Ramrattan, and Aron A. Gottesman

Print publication date: 2006

Print ISBN-13: 9780199298839

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199298839.001.0001

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Paul Samuelson and International Trade Theory Over Eight Decades

Paul Samuelson and International Trade Theory Over Eight Decades

Chapter:
(p.197) 13 Paul Samuelson and International Trade Theory Over Eight Decades
Source:
Samuelsonian Economics and the Twenty-First Century
Author(s):

Avinash Dixit (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199298839.003.0014

This chapter provides an appraisal of Samuelson's work on trade theory. It explains the scientific importance of starting with the Ricardian 2x2 model and the current literature on comparative advantage. Samuelson rests this model on the shoulders of giants, whether we want to explain gains from trade by swapping bananas for steel, or from the modern theoretical points of view. Samuelson has picked up this model without any rigorous proof and has given it many ‘operational’ assumptions so that one can test — or falsify — its predictive or explanatory powers. Proof of this model led to the welfare gain concept that Samuelson advanced from the classics, and anchored squarely on the First and Second Welfare Theorems. With these theories, trade can now be modeled to assess who gains, for instance, in the formation of a free trade agreement. This kind of research has only just begun.

Keywords:   2x2 models, Pareto efficient, Stolper-Samuelson Theorem, Arrow-Debreu Theorem, incomplete markets, Richard

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