Comparative Advantage in the Light of the Old Value Theories
The chapter examines the historical process of how the comparative advantage theory developed from James and John Stuart Mill to the modern theory, by way of Viner’s real cost approach, Haberler’s opportunity cost approach and Ohlin’s factor endowment app
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Abstract The chapter examines the historical process of how the comparative advantage theory developed from James and John Stuart Mill to the modern theory, by way of Viner’s real cost approach, Haberler’s opportunity cost approach and Ohlin’s factor endowment approach, in the light of old value theories. Since J. S. Mill, the theory of values had met with a succession of modifications, while the doctrine of comparative costs remained unchanged. Thus, the divergence between the general theory of values and the value theory used in the theory of international trade widened. The debate between Viner’s real cost approach and Haberler’s opportunity cost approach in the 1930s was an important turning point and resulted in the emergence of the new mainstream theory – the HOS model. Its unrealistic assumptions were derived from Haberler’s opportunity cost approach. Keywords Comparative advantage • Opportunity cost • Haberler • Viner • Samuelson
1 Introduction This chapter presents a historical analysis of how the doctrine of comparative costs has developed from Ricardo to modern economics from the viewpoint of the new international value theory (Shiozawa 2007, 2014), focusing on the controversy in the 1930s. At that time, there were three competing approaches to the theory of comparative advantage: Jacob Viner’s real cost approach, Gottfried Haberler’s opportunity cost approach and Bertil Ohlin’s factor endowment approach. It has been said that the last two quickly overwhelmed the first, and the Heckscher-OhlinSamuelson model emerged as the new mainstream theory of international trade after World War II through the efforts of Paul Samuelson.
T. Tabuchi () Faculty of Commerce, Doshisha University, Kyoto, Japan e-mail: [email protected] © Springer Science+Business Media Singapore 2017 Y. Shiozawa et al. (eds.), A New Construction of Ricardian Theory of International Values, Evolutionary Economics and Social Complexity Science 7, DOI 10.1007/978-981-10-0191-8_9
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However, a closer look at this process reveals problems and puzzles: 1. Viner and Haberler were rivals but shared the misconception that Ricardo’s theory of comparative costs was based on the labour theory of value. They insisted on removing the labour theory of value from the doctrine of comparative costs and replacing it with their own value theories – Viner’s real cost theory and Haberler’s opportunity cost theory. 2. Viner failed to find a common unit with which to measure the subjective costs of labour and capital (i.e. the ‘irksomeness’ of labour and ‘abstinence’ or ‘waiting’). On the other hand, Haberler’s approach created a theory of international values with multiple factors, introducing the substitution curve based on Austrian value theory (now known as the ‘transformation curve’ or ‘production possibility frontier’), which, as Viner pointed out, had the fatal flaw of assuming fixed factor supplies and factor indifference as to alternative uses. 3. Contrary to popular perception, Ohlin showed disdain for the concept of ‘
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