ABSTRACT
This chapter talks about that Professor F. D. Graham's argument which is fallacious, though the way in which the classical theory has been formulated in many instances leaves much to be desired. The peculiarity of international trade as compared with domestic lies in the immobility of population viewed as labour power. The fallacy to be exposed is a misinterpretation of the relation between social cost and entre-preneur's cost. The application of the reasoning will probably suggest the fallacy to anyone familiar with conventional economic theory. When costs are measured in value terms and product in physical units there are two sorts of reasons for increasing cost, one reflecting value changes and the other technological changes. A further major fallacy in value theory which suffuses Professor Graham's argument will be pointed out in general terms before proceeding with detailed criticism. The chapter covers the main points in the writings criticized which involve fallacies in the interpretation of cost.
