An Introduction to Unfashionable Economics

Since the beginning of modern economic theory in Europe the importance of foreign trade as a means of increasing welfare has been stressed. There was, however, a change in emphasis and understanding. While the Mercantilists were mainly concerned with increasing their own nation’s well-being, irrespective of the effects of their proposed policies on other nations — to them it seemed, in fact, clear that they were playing a zero-sum game — later schools of economic thought have believed (or at least stressed) that trade would be to the advantage of all. While Mercantilists differentiated between ‘good’ and ‘bad’ trade, their successors soon came to see trade, as such, as a purely positive phenomenon. Free trade, unhampered by governments, would increase global welfare: this has been one of the standard arguments of orthodox economists for roughly two centuries. The best-known relic of the beginning of the age of freetraders, still revered today, is doubtlessly the Torrens-Ricardo theory of comparative advantages. Neoclassical economists preaching a world of harmonious equilibria were predictably quick to elaborate theories of mutual advantages even further.