The core of international microeconomics remains the Heckscher-Ohlin factor-proportions model. Although the page count in recent academic journals is decidedly against the Heckscher-Ohlin model, this is more a reflection of how economists spend their research time than what they believe. Time will tell whether the flurry of formal models with scale economies and strategic interactions will be able to squeeze the Heckscher-Ohlin model to a small part of economists' collective consciousness. Frankly I doubt that this will happen. After all, the Heckscher-Ohlin model has competed for decades with these other viewpoints and has done so quite successfully. The theories of international trade are novel in a linguistic sense, discarding the English-only language of an earlier generation in favor of the language of modern mathematical modeling. There is no doubt that linguistic innovations are important and are capable of driving the profession one way or the other at least on a temporary basis. Recall that even the word protection is a metaphor intended to make tariffs seem attractive. I wonder how the commercial-policy debate would go if tariffs were labeled instead of protection. I hope that there is something about the content of the message, separate from the language, that determines the ultimate course of the intellectual currents of our profession. Insightfulness, validity, usefulness, and the like ought to matter and may be decisive. Linguistic novelty is one possible reason for the recent interest in scale economies and industrial strategies as explanations of international trade. Another possibility is that, in the marketplace of ideas, demand creates its own supply. There is a new thirst for isolationism on the part of a substantial segment of the U.S. population, who in the last several decades have found their earnings under attack from foreign competition. It would be unseemly and counterproductive for this group of workers/owners to petition the U.S. government merely to increase their own earnings. They demand (and they have been supplied) some substantial intellectual foundation to justify their complaints about reduced earnings. The trade theory does the job quite nicely, thank you. A not insubstantial reason why economists should cling to the Heckscher-Ohlin model is that it gives trade barriers the label that they genuinely deserve: highway robbery. Of course, this robbery is often more in the style of Robin Hood than Jesse James, but nonetheless, when the metaphors are peeled away, every trade barrier that I have ever seen is a device to transfer income from one group to another, or perhaps more frequently to stop the transfer of income that would otherwise take place. Trade barriers may have side effects, but income redistribution is their primary purpose. I find myself at roughly the 10-percent point in this paper without mentioning any empirical facts. First there was linguistic felicitousness and novelty, then there was pandering. What about the facts? Don't they matter? Sorry, they do not matter very much. One important reason why the facts do not matter much is that the Heckscher-Ohlin model (and every other model in economics) is both factually correct and factually incorrect. We have not developed an intellectual culture that can deal with the complexity and ambiguity of real economic phenomena. We teach ourselves a naive *Anderson Graduate School of Management, University of California, Los Angeles, CA 90024.
Stored only when both papers are in the corpus — 33 citations exist upstream.