The classical view

Classical economists believed the there was a fundamental difference between theme trade and foreign trade. They pointed out that labour and capital move freely within a county but not between different countries. Thus international immobility of factors was the basic criterion accepted by the classical economists of rate emergence of international trade. Moreover different national policies different political units different monetary systems and artificial barriers polices different political unties different monetary systems and artificial barriers like tariffs and exchange on trolls involved in international trade distinguish it from domestic trade. Commodities within one such country did not apply to exosmic relations between different countries. Hence a separate theory of international trade was necessary and justified.

Ohlin’s view

Bertie Ohlin the Swedish economist however challenged the traditionally accepted notion on international trade by avocation that there is no need for a separate theory of international trade i. in his view international trade is but a special case of inter local or inter regional trade.

He opines that the Marshallian theory of value can be easily extended to the phenomenon of international trade by developing the space thesis instead of the time hypothesis in the Marshallian price theory space element is vital for the through its extension from one to a number of more or less closely related markets. Such an extension can be based upon one market analysis.

In economic life the concept of space has the following significance

1. The factors of production are generally confide to cretin location and

2. Free movements of goods are also prevented by the transportation costs and other inhibitory factors.

In short form the space consideration there arose the concept of mobility or immobility of the factors of product as located not in certain places but in cretin districts he further laid down that the concept of district should fulfill at least two conditions.

1. There should be significant difference between the districts and

2. There should be little difference within a single district

In other words a district satisfying these two conditions may be regarded as a region

Under these considerations of the space element if we take the axiom that the factors fo production are inter regionally immobile but intra regionally (within the region) freely mobile then most conveniently we can extrapolate the analysis of development of the concept of the one market theory can include the theory of international trade as an integral part of the general price theory and that therefore there is no need for a separate theory of international trade.

Thus on methodological grounds Ohlin tends to reject the necessity for a separate study of international economics. We however cannot agree with Ohlin on this issue that a separate study of international trade is not warranted purely of methodological reasons. There are various qualifications and variation within a separate branch of study which by all means render a special study quite essential. For an intensive study a separate branch of the phenomenon is more logical and justifiable than to hold menasigles behaviousr generalizations.

We may thus say that since there are spcialised branches of economics like theory of value theory of money public finance industrial economics labour economics and so on there must also be a special study of international trade separately called international economics.

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