The theory of exchange

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Chapter 2 in The International Monetary System and the Theory of Monetary Systems, 2016, pp 7-15 from Edward Elgar Publishing

Abstract: The theory of international trade is an application of the more general theory of exchange, so it is important to recall the main lessons which can be drawn from this latter theory. Whenever a transaction takes place freely between two individuals, the market (measurable) value of a purchase is equal to the market value of the corresponding sale. But for each individual the subjective (non-measurable) value of what he buys is higher than the subjective value of what he sells. If exchange is possible, each individual decides to specialize in the production in which he is relatively more efficient. Thus exchange brings (subjective) gains and, moreover, it induces people to specialize. This remains true whenever trade takes place between individuals located in different nations.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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