The theory of tariffs, the most fertile field of economic speculation in the days of the classical economists, has for some time lain barren. Historically, it was the origin of the modern subjective theory of value (in the doctrine of comparative costs), it was earliest in emphasising the importance of demand in determining relative prices (J. S. Mill’s reciprocal demand), and it has provided the analytical tools, Marshall’s offer curves, from whose application to the problem of exchange between persons the general theory of perfect competition has been developed. Unfortunately, however, the analogy between countries and persons was considered irreversible. Our theory of the individual’s rational economic behaviour was not applied to problems of international trade because of our supposed inability to draw community indifference curves. Hence, we have no theory of the rational behaviour of a single country, and even less do we know what would be the result of such behaviour on the part of all countries.
Unable to display preview. Download preview PDF.