Determination of the Pattern of Specialization as a Cost-Minimizing System. A Note on the Importance of the Distributive Closure

IANNI, GUIDO

Siena

Conferencia; ?The Social Rules! Norms, Interaction, Rationality" STOREP conference; 2019

Italian Association for the History of Political Economy (STOREP)

Based on the surplus approach, the present paper aims to develop an extension to value and distribution theory capable of dealing with international trade. Although the seminal work of Metcalfe & Steedman (1981) is followed closely, it?s scope has been extended. The role of the exchange rate as a «regulator» of income distribution and its influence in the determination of the pattern of specialization has been stressed. The main results that follows from the analysis here presented are the following: a) if technical conditions of production and distribution of an economy have no influence in the determination of international prices, then this economy only produces non-basics or agricultural commodities; b) the choice of techniques problem for the closed economy is extended to deal both with the existence of alternative methods of production in a given economy, as well as to the determination of the pattern of specialization that will tend to be adopted. Additionally, it is shown that c) if an economy faces given prices for industrial commodities, only one of these will be produced; d) as the price system for the open economy might exhibit an additional degree of freedom when compared to a closed economy, a given change in the real exchange rate might or might not change the dominant technique depending on the which is the endogenous distributive variable. This is true for both the nationwide and for the worldwide choice of techniques; e) sorting techniques by its «factor intensity» might be impossible even in the absence of reverse capital deepening and reswitching; and f) any ordering of industries of an economy by means of a criterion of «competitiveness» may change with the distributive closure. Hence, comparative advantages cannot be defined in general.