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FROM THE CLASSICAL ECONOMISTS TO EMPIRICISTS: A REVIEW OF THE TERMS OF TRADE CONTROVERSY
Author(s) -
Chakraborty Shouvik,
Sarkar Prabirjit
Publication year - 2020
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/joes.12390
Subject(s) - economics , realm , argument (complex analysis) , empiricism , positive economics , neoclassical economics , economic thought , trace (psycholinguistics) , position (finance) , history of economic thought , statistical evidence , keynesian economics , epistemology , philosophy , political science , econometrics , null hypothesis , law , biochemistry , chemistry , linguistics , finance
Contrary to the classical position, the works of Prebisch and Singer in the middle of the last century launched the controversial hypothesis of a long‐term decline in the terms of trade of primary products vis‐á‐vis manufactured goods and a corresponding decline in the terms of trade of developing countries vis‐á‐vis advanced ones. The present study traces the origin and evolution of the hypothesis and reviews the related statistical debate. It also reviews the theoretical support for the Prebisch–Singer hypothesis. It is an exercise in the history of economic thought to trace how the controversies surrounding the terms of trade have evolved over time, specifically noting that, with the development of the field of econometrics, the central thesis of the argument got lost somewhere in the realm of hi‐tech statistical debates.