Free international economic policy in a world of schumpeter goods

Abstract

The greater part of international trade takes place among developed nations, and a substantial part of this trade takes place under the auspices of multinational corporations (MNCs). The free trade argument as developed under the traditional factor-proportions theory cannot hold when the bulk of trade takes place among nations with quite similar supplies of generic factors. This paper offers a tripartite model of international trade comprising natural-resource goods, “ordinary goods,”and Schumpeter goods (S-goods), which rely on the existence of technology that is proprietary to the producing firm. This article shows that the argument for a broader concept of noninterference with the exchange of goods and services (free economic policy) is still valid if the goal is the maximization of world welfare.