On Adam Smith's Contributions to the International Trade Theory

Abstract

Adam Smith is generally ignored as a trade theorist in textbooks of international economics because of the common belief that he only confirmed the rule of absolute advantages to explain structure of foreign trade. However, his vent-for-surplus approach may be interpreted as a pioneering study which stresses the importance of economies-of-scale in explaining the structure of trade. This short paper addresses to the undeniable influence of Smith's concepts such as "extent of the market", "division of labor", "improved dexterity in every particular workman" and "simple inventions coming from workman" on trade theory.Adam Smith; international trade; specialization; economies of scale; vent for surplus; absolute advantages