Abstract
In many industrialized countries there exist large idle production capacities. Conceivably, these might be used for increased economic aid to developing countries and for the stimulation of trade with incompletely convertible currency territories. Concurrently, a stimulation of the economic development of the industrialized countries might be achieved. In developing countries, there may be need for using available export resources in an efficient way to obtain required imports. In the Soviet sphere of influence, there is the problem of how the state foreign trade monopolies should allocate available export quantities and scarce convertible currencies, so as to obtain required import quantities. Related problems were encountered by Western boards of trade after the war in allocating import and export licences. This paper deals with the problem how to attain efficient allocations in foreign trade with the help of modern electronic computational technique. The computational system may be developed to account for inter-industry relations and industrial investments in order to achieve a high rate of economic growth.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Literature
Cf. Ragnar Frisch «A Multilateral Trade Clearing Agency»,Statsøkonomisk tidsskrift, No. 1, March, 1963; and «Matematisk teori for multilateral clearing» Del. 1, 7. februar 1963; Memoranda from the Institute of Economics, University of Oslo.
For a detailed account and criticism cf. Tom Kronsjö, «The Possibility of Improving Present Foreign Trade Planning as regards Bilateral Markets with a Linear Program», Institute of Economics, Lund University, Sweden, October–November 1959, 33 pp.
Tom Kronsjö, «Optimization of Foreign Trade Policy for a Planned Economy by Mathematical Programmes», Institute of Economics, Lund University, May 1960, 90 pp.
Tom Kronsjö, «Zastosowanie programowania liniowego w planowaniu handlu zagranicznego» inZeszyty Naukowe Szkoly Glownej Planowanii i Statystyki (Scientific Bulletin of the Main School of Planning and Statistics), No. 33, Warsaw, 1961, pp. 3–58.
After the completion of this research work, the author appreciated receiving the draft article by Drs. András Nagy and Tamas Lipták, «A Short Run Optimization Model of Hungarian Cotton Fabric Exports» to be published inEconomics of Planning, No. 2, 1963. The scientific conclusions reached in these independent and complementing investigations strongly support each other and stress the importance of further research.
A. C. Williams, «A Treatment of Transportation Problems by Decomposition»,Journal of the Society for Industrial and Applied Mathematics, Vol. 10, No. 1, March 1962, pp. 35–48.
A. C. Williams, A Stochastic Transportation Problem (to appear inJournal of Operations Research).
IBM SHARE Program Submittals: A. R. Friedenheit, «DATASS Section of LP Decomposition Code, HOXS-MFDASS», March 1, 1962, with short write-up.
A. C. Williams and A. R. Friedenheit, «DECOMP Section of LP Decomposition Code HOXSMFDCOM». March 1, 1962, with short write-up
A. C. Williams, Personal letter to the author of the 5th December, 1962.
Cf. footnote p. 3.
W. Trzeciakowski, «Model optymalizacji bieza,cej polityki kierunkowej w handlu zagranicznym»,Gospodarka Planowa, Nr. 8-9, 1960, pp. 47–53.
W. Trzeciakowski, Problemy kompleksowego systemu analizy efektywnosci bieza,ceij handlu zagranicznego, Warsaw, 1960–61.
J. Abadie, «Un nouvel algorithme pour programmes lineaires: Le principe de decomposition de Dantzig et Wolfe»,Revue Française de Recherche Opérationelle, 1961, pp. 93–115.
G. B. Dantzig and P. Wolfe, «A Decomposition Principle for Linear Programs».RAND Report P-1544, Nov. 10, 1958, revised Nov. 6, 1959 and RM-2813-PR, Sept. 1961. Also inEconometrica, Oct. 1961 andOperations Research, No. 8, 1960, pp. 101–111.
Philip Wolfe, «Recent Developments in Nonlinear Programming”,RAND Report R-401-PR, May 1962, 40 pp.
Cf. footnote 19) By the shadow or optimal price of a constraint is understood the rate by which the preference function increases in relation to an increase of the corresponding constraint, p. 22.
The same type of problem was dealth with—using a strict linear programme approach—in the authors's studies of Nov.–Dec. 1959 and May 1960.
Director of Research, Ministry of Foreign Trade, Warsaw.
cf. «Gospodarka planowa», Nr. 8/9 1960, pp. 47–53.
This solution was obtained on the FACIT-EDB computer of the Swedish Board for Computing Machinery, Stockholm. The solution obtained by W. Trzeciakowski using his arbitrary price method deviates somewhat from the above optimal solution.
The possibility of the last-mentioned difficulty was pointed out by Dr. K. Bhagwandin in a discussion with the author on numerical aspects of the method.
Address: Institute for International Economic Studies, Wenner-Gren Center, Sveavägen 166, Stockholm Va, Sweden.
A Short-run Optimization Model of Hungarian Cotton Fabric Exports to be published inEconomics of Planning, No. 2, 1963.
By the shadow or optimal price of a constraint is understood the rate by which the preference function increases in relation to an increase of the corresponding constraint.
Author information
Authors and Affiliations
Additional information
Editor's note: This is the first of a series of articles on foreign trade planning scheduled to appear inEconomics of Planning, 1963.
The author wants to express his sincere gratitude to Professors Gunnar Myrdal, Göran Ohlin, Ragnar Frisch and Aron Yakovlevich Boyarskij for generous scientific support and criticism; to Dr. Ketternath Bhagwandin, Gunnar Ehrling, and Lars Nilsson for advice in connection with the computer program and for the generous grant of computing time by the Swedish Board for Computing Machinery.
Rights and permissions
About this article
Cite this article
Kronsjö, T. Iterative pricing for planning foreign trade. Econ Plann 3, 1–22 (1963). https://doi.org/10.1007/BF02481303
Issue Date:
DOI: https://doi.org/10.1007/BF02481303