Classical Trade Theory versus Keynes’s General Theory of International Trade and International Payments

Paul Davidson

Chapter 9 in John Maynard Keynes, 2007, pp 126-144 from Palgrave Macmillan

Abstract: Abstract The classical law of comparative advantage and classical theory’s presumption of the desirability of freely flexible exchange rates1 are the foundations of mainstream economists’ claim that free trade and unfettered international finance markets are socially desirable since they promote maximum efficiency and prosperity globally. On the other hand, Keynes’s analysis of the operation of a monetary economy suggests that, like Say’s Law, the conventional wisdom regarding the importance of the classical law of comparative advantage and the desirability of flexible exchange rates can be “misleading and dangerous”.

Date: 2007
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DOI: 10.1007/978-0-230-23547-2_9

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