Paul A. Samuelson and the Foundation of International Economics

The bell is still tolling for Samuelson’s works on trade theory. This chapter looks at some models he presented that are still relevant for global trade driven by communication and digital technologies. The models rest on a sound general equilibrium base, for which Samuelson used theoretical and operational perspectives. The models invoke free trade, which bequeaths potential gains for all players. In today’s world of increasing productivity for many underdeveloped economies, the Stolper–Samuelson theorem points to the idea that rich nations which lose comparative advantages may suffer lower wages and lower net gains from trade. An allied theorem relates to factor price equalization where competition in final products can cause convergence in factor prices. This chapter presents Samuelson’s fundamental contributions to international trade theory, including his contribution to the transfer problem, which constituted the main research programs in the last half-century or more in this field of economics, and are still the paradigms for future research.