Old and new theories of international trade

Here are some of the old and new theories of international trade:

Old Theories:

  1. Mercantilism (16th-18th centuries): The idea that a country's wealth and power can be increased by exporting more goods than it imports. This led to protectionist policies, such as tariffs and quotas.
  2. Classical Theory (18th-19th centuries): Developed by Adam Smith, David Ricardo, and Thomas Malthus, this theory emphasizes the benefits of free trade, arguing that countries should specialize in producing goods in which they have a comparative advantage.
  3. Heckscher-Ohlin Theory (1920s-1930s): This theory, developed by Eli Heckscher and Bertil Ohlin, explains international trade in terms of differences in factor endowments (e.g., labor, capital) between countries.
  4. Ricardian Theory (1817): David Ricardo's theory of comparative advantage, which states that countries should specialize in producing goods in which they have a lower opportunity cost.

New Theories:

  1. New Trade Theory (1960s-1970s): This theory, developed by Paul Krugman and others, emphasizes the role of imperfect competition, economies of scale, and product differentiation in international trade.
  2. New Economic Geography (1980s-1990s): This theory, developed by Paul Krugman and others, examines how geographic factors, such as transportation costs and agglomeration economies, affect international trade and economic development.
  3. Global Value Chain Theory (1990s-present): This theory, developed by Gary Gereffi and others, highlights the importance of global supply chains and the role of multinational corporations in shaping international trade patterns.
  4. Institutional Theory (1990s-present): This theory, developed by Douglass North and others, emphasizes the role of institutions, such as property rights, contract enforcement, and government policies, in shaping international trade patterns.
  5. Behavioral Theory (2000s-present): This theory, developed by behavioral economists such as Dan Ariely and others, examines how psychological biases and heuristics influence international trade decisions and outcomes.
  6. Gravity Model (2000s-present): This theory, developed by economists such as James Anderson and others, uses gravity-like equations to model international trade flows and examine the factors that influence them.
  7. Network Theory (2010s-present): This theory, developed by economists such as Yann Algan and others, examines how networks of firms, countries, and institutions shape international trade patterns and economic outcomes.

These new theories have helped to refine our understanding of international trade and have led to the development of more nuanced and complex models of international trade.