Revisiting the Relevance of International Trade Theory

Mark Lutz
2008 Forum for Social Economics  
Probably one of the most controversial contributions to the literature of international trade theory was offered by the late social economist John Culbertson. In his view, low wage competition among corporations in a world characterized by capital mobility and massive trade deficits undermines the foundation trade theory based on David Ricardo's celebrated notion of comparative advantage. Instead, there are several good reasons to believe that international trade with China, India, Vietnam,
more » ... India, Vietnam, etc. will be governed by absolute advantage. The current essay is dedicated to the virtually ignored work of Culbertson, and it is meant as an invitation for social economists to critically evaluate the argument and in the process make an attempt to point out where it goes wrong. Keywords Comparative advantage . Low wage competition . Outsourcing . John Culbertson . Absolute advantage There are few matters that most economists can agree on, but one is the long-held conviction that the free flow of goods, services, and capital across international borders, a flow uninhibited by tariffs and other obstructions, will benefit all the trading partners. Thanks to David Ricardo's insight regarding comparative advantage, the almost three-century-old predilection toward "laissez aller, laissez For Soc Econ (
doi:10.1007/s12143-007-9008-z fatcat:khwfijzexngtrhnabxxre3jbj4