ABSTRACT
In his New Palgrave essay, John Chipman remarked that “a good definition of international-trade theory as it has evolved would be ‘‘general equilibrium theory with structure’”. The need for “additional structures” arose out of the emphasis on developing Samuelsonian “comparative statics”: meaningful theorems on the qualitative behavior of variables with respect to changes in parameters. “To obtain unambiguous qualitative results, one needs fairly drastic simplifications”, noted Chipman, and among such simplifications is the restriction on the number of agents and commodities. “The number ‘‘two’ is undoubtedly encountered more frequently in the theory of international trade than in any other field of economics” (Jones 1977) and the appropriateness of “two-by-two” models has been much discussed. One can question the significance of a proposition that does not generalize to higher dimensions in any meaningful way. One can also think of economic problems that cannot even be posed in such a framework. On the other hand, such models can be useful points of departure in research, and can “present a standard of comparison against which truly multi-dimensional results can be appreciated” (Jones 1977).
