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International Economics, Robert A. Mundell, New York: Macmillan, 1968, pp. v-vi.


Robert A. Mundell

This book brings together, and to a certain extent integrates, my theoretical writings on international economics over the past decade. All the major topics are touched on, and I have organized them into a pattern that seemed to me to make them most useful to the student. Part I analyzes the classical theory and covers such topics as the terms of trade, income transfers, productivity changes, tariffs, consumption taxes, production taxes, transport costs, tariff preferences, factor mobility, and policy analysis in the context of general equilibrium systems. Part II introduces monetary-dynamic elements into the theory of exchange and develops the theory of adjustment, the balance of payments, growth, the distribution of the burden of adjustment, optimum currency areas, monetary standards, and fixed and flexible exchange rate systems. Part III treats international macroeconomic theory from the standpoint of the theory of policy and develops the principle of effective market classification, the appropriate mix of monetary and fiscal policy under fixed and flexible exchange systems, capital mobility, the international transmission of cycles, commercial policy, the welfare cost of exchange crises, the crisis problem, and multiple-currency systems.

The book, looked upon as a text, is perhaps most suitable in courses of international economics for graduate students, or, in those institutions where undergraduates receive substantial instruction in theory and money, for seniors. But just as international economics cannot be studied independently of value and monetary theory, so value theory and monetary theory cannot be divorced from the subject matter that is studied in trade theory. The theory of exchange and general equilibrium, treated in Part I of this book and in the final chapter, are as much a part of general theory as optimum currency area theory and the monetary-fiscal policy mix are part of the theory of money. For this reason some teachers may find various chapters useful as supplementary reading for students of courses in general theory or in monetary theory.

Many of the topics covered in this book have a bearing on the great controversies that have raged in the economics profession since the publication of Keynes' General Theory. Keynes' attempt to integrate real and monetary phenomena was only partially successful, but he gave new scope to economic thinking about theory and policy. Just as theorists in the nineteenth century eventually settled their differences over which blade of the scissors did the cutting, so economists today are becoming increasingly impatient with analysis based solely on multiplier or on velocity approaches to income determination. What emerges is a richer and more useful theory based on general equilibrium analysis. To accelerate this end, in the field of international economics, I trust this book makes a contribution.

A complete list of acknowledgments to teachers, friends, students, and colleagues would be too long and would detract from the special indebtedness I owe to select individuals. My earliest indebtedness is to two great teachers at the University of British Columbia, Joseph A. Crumb in the Economics Department and William J. Rose of the Slavonic Studies Department. I owe a general debt in 1953-54 to members of the Economics Department at the University of Washington and especially to Donald F. Gordon.

I had the good fortune in the three years from 1954 to 1957 to benefit from personal association with C. P. Kindleberger, P. A. Samuelson, J. E. Meade, S. A. Ozga, L. Robbins, H. G. Johnson, M. Friedman, A. C. Harberger, and L. A. Metzler. Their influence on my work will, it is hoped, not have escaped detection. Subsequently, K. J. Arrow greatly encouraged my interest in general equilibrium theory.

In the preparation of this volume I have exploited the advice of friends and students. H. G. Johnson, to whom I owe numerous debts incurred over the past decade, made many suggestions. Lawrence Krause, Walter Salant, Alexander Swoboda, and Bernard Munk made helpful comments. Kishori Lal, Houston Stokes, Michael Mussa, and Rudiger Dornbusch (who prepared the bibliography) contributed at various stages. Paulette Lundgren and Judith Kidd provided valuable assistance.

For permission to reprint material from which, in whole or in part, material has been adapted, I am happy to acknowledge the American Economic Review, The Quarterly Journal of Economics, Econometrica, the National Banking Review, Kyklos, The Canadian Journal of Economics and Political Science, the Manchester School of Social Studies, the IMF Staff Papers, the Banca Nazionale del Lavoro Quarterly Review, and the International Encyclopaedia for the Social Sciences.

R. A. M.

© Copyright Robert A. Mundell, 1968