International trade

Bibliographic data

Monograph

Identifikator:: 1758394757

URN:: urn:nbn:de:zbw-retromon-136209

Document type:: Monograph

Author:: Taussig, Frank William http://d-nb.info/gnd/120199459

Title:: International trade

Place of publication:: New York, NY

Publisher:: Macmillan

Year of publication:: 1927

Scope:: XXI, 425 Seiten; graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part I. Theory

Collection:: Economics Books

COMPARATIVE COSTS 25 Observe that the prices of the goods are such that wheat moves from the United States to Germany, linen from Germany to the United States. Wheat, tho produced in the United States by labor receiving wages higher than those in Germany, yet sells for $0.75 in the United States. Wheat, if produced in Germany would sell there for $1.00; its domestic supply price — its cost of pro- duction in the business sense — is higher in Germany even tho it is produced by labor receiving wages lower than those in the United States. This sort of situation is apt to surprise most people : how can an article sell at a low price in a country where wages are high? The answer is simple enough: it can do so if the high paid labor is effective, as in this case with American labor for wheat. On the other hand, Germany can produce linen at a lower price than the United States, notwithstanding the fact that German labor is less effective in producing linen than American. The explanation again is simple: the labor, tho less effective, is paid at a money rate which is not only less, but is lower to an extent more than in proportion to the less effectiveness. Wheat is cheaper in the United States, tho produced with high-paid labor; linen is cheaper in Germany, tho produced with ineffective labor. Come now a step still closer to reality. What quantities of goods might be expected to move between the two countries, and what total sums of money might they represent in the way of imports and exports ? Suppose — again for illustration — The U. S. sends to Germany 8,000,000 bushels of wheat at $0.75 = $6,000,000. Germany sends to the U. S. 9,000,000 yards of linen at $0.662 = $6,000,000. The money sums balance ; the wheat sent from the United States exactly suffices to pay for the linen received from Germany. The transactions will be carried out thru the mechanism of the foreign exchanges, and the demands for bills of exchange would be exactly met by the offerings of exchange. Exchange would be at par, no specie would flow between the two countries; all is quiet. With these transactions, 8,000,000 bushels wheat exchange for 9,000,000 yards linen. The barter terms of trade thus are 8 wheat = 9 linen; or, 10 wheat = 11} linen. That the trade takes place

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