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Prices and Terms of Trade for Developed Country Exports of Manufactured Goods

In: The Economics of Relative Prices

Author

Listed:
  • Irving B. Kravis

    (University of Pennsylvania and National Bureau of Economic Research)

  • Robert E. Lipsey

    (City University of New York and National Bureau of Economic Research)

Abstract
The subject of the terms of trade between manufactured goods and primary products has a long history, and opinions on the direction of trends in them have gone through several cycles. Recently, and until the last few years, the majority opinion, especially in developing countries and in agencies representing their views, has been that manufactured goods have generally risen in price over the past century or so. This was true, despite the fact that such a rise would have violently contradicted one of the most firmly held and basic beliefs of classical economics. That was that as a consequence of diminishing returns-of rising population pressing against a constant supply of resources, especially land—there must in the long run be a rise in primary goods prices, especially agricultural prices, relative to the prices of manufactured goods. For example: The tendency, then, being to a perpetual increase in the productive power of labour in manufactures, while in agriculture and mining there is a conflict between two tendencies, the one towards an increase of productive power, the other towards a diminution of it, the cost of production being lessened by every improvement in the processes, and augmented by every addition to population; it follows that the exchange value of manufactured articles, compared with the products of agriculture and of mines, have, as population and industry advance, a certain and decided tendency to fall. (Mill, 1848, Book IV, Ch. II).

Suggested Citation

  • Irving B. Kravis & Robert E. Lipsey, 1984. "Prices and Terms of Trade for Developed Country Exports of Manufactured Goods," International Economic Association Series, in: Béla Csikós-Nagy & Douglas Hague & Graham Hall (ed.), The Economics of Relative Prices, chapter 18, pages 415-453, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-06265-2_18
    DOI: 10.1007/978-1-349-06265-2_18
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    References listed on IDEAS

    as
    1. Irving B. Kravis & Robert E. Lipsey, 1971. "Price Competitiveness in World Trade," NBER Books, National Bureau of Economic Research, Inc, number krav71-1.
    2. Nancy D. Ruggles, 1974. "The Role of the Computer in Economic and Social Research in Latin America," NBER Books, National Bureau of Economic Research, Inc, number rugg74-1.
    3. Kravis, Irving B & Lipsey, Robert E, 1982. "Prices and Market Shares in the International Machinery Trade," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 110-116, February.
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    Cited by:

    1. Michael Bruno, 1981. "Raw Materials, Profits, and the Productivity Slowdown (Rev)," NBER Working Papers 0660, National Bureau of Economic Research, Inc.
    2. Jeffrey Sachs, 1982. "Stabilization Policies in the World Economy: Scope and Skepticism," NBER Working Papers 0862, National Bureau of Economic Research, Inc.
    3. Michael Bruno, 1982. "World Shocks, Macroeconomic Response, and the Productivity Puzzle (Rev)," NBER Working Papers 0942, National Bureau of Economic Research, Inc.
    4. Kausik Chaudhuri, 2001. "Long-run prices of primary commodities and oil prices," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 531-538.

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