History of The Theory's Development
The theory was initially associated with Paul Krugman in the late 1970s; Krugman claims that he heard about monopolistic competition from Robert Solow. Looking back in 1996 Krugman wrote that International economics a generation earlier had completely ignored returns to scale. "The idea that trade might reflect an overlay of increasing-returns specialization on comparative advantage was not there at all: instead, the ruling idea was that increasing returns would simply alter the pattern of comparative advantage." In 1976, however, MIT-trained economist Victor Norman had worked out the central elements of what came to be known as the Helpman-Krugman theory. He wrote it up and showed it to Avinash Dixit. However, they both agreed the results were not very significant. Indeed Norman never had the paper typed up, much less published. Norman's formal stake in the race comes from the final chapters of the famous Dixit-Norman book.
James Brander, a PhD student at Stanford at the time, was undertaking similarly innovative work using models from industrial organisation theory—cross-hauling—to explain two-way trade in similar products.
Read more about this topic: New Trade Theory
Famous quotes containing the words history of, history, theory and/or development:
“The history of men’s opposition to women’s emancipation is more interesting perhaps than the story of that emancipation itself.”
—Virginia Woolf (1882–1941)
“All history attests that man has subjected woman to his will, used her as a means to promote his selfish gratification, to minister to his sensual pleasures, to be instrumental in promoting his comfort; but never has he desired to elevate her to that rank she was created to fill. He has done all he could to debase and enslave her mind; and now he looks triumphantly on the ruin he has wrought, and say, the being he has thus deeply injured is his inferior.”
—Sarah M. Grimke (1792–1873)
“every subjective phenomenon is essentially connected with a single point of view, and it seems inevitable that an objective, physical theory will abandon that point of view.”
—Thomas Nagel (b. 1938)
“As long as fathers rule but do not nurture, as long as mothers nurture but do not rule, the conditions favoring the development of father-daughter incest will prevail.”
—Judith Lewis Herman (b. 1942)