Globalization and the Theory of Input Trade.

• Author: Thompson, Henry
• Position: Brief Article

Ronald W. Jones

Cambridge, MA: MIT Press, 2000. Pp. x, 177. $24.95.

This short book on trade theory with internationally mobile inputs based on the 1997 Ohlin Memorial Lectures of Ronald W. Jones is a must read for students of trade theory. With clear English and diagrams, Professor Jones surveys trade theory in the presence of internationally traded productive capital input. The models are beautifully developed with clear and masterful intuition. The reader is literally compelled to mull over each sentence, to think about the economics. Reading the book is an educational pleasure.

The book is divided into two sections on positive and normative issues in "globalization," taken to mean the increased openness of economies to trade in products and international capital. The models are static or comparative static in nature rather than dynamic growth models. "Capital" is the productive capital that enters into production functions.

The fundamental models of trade in inputs are carefully presented. The "classic" issue of the choice between international mobility of products and factors of production is cast in a new light. Professor Jones' idea that the "hinterland" of available resources provides a source of comparative advantage is developed. There is a chapter on trade in intermediate or "middle" products.

The chapters on normative issues present novel ideas. Jones advances an alternative explanation for formation of international policy. There are two theories at present, neoclassical and public choice. The neoclassical theory of policy formation is based on national utility...