ABSTRACT
This chapter surveys the main elements of the theories and empirical analyses of international trade and balance of payments that bear directly on the analysis of change in the international system. It provides a review of the role of economics in different international relations theories. The chapter also provides the background for the development of an integrated framework for a political economy approach to international relations. It focuses on theoretical aspects of change in the international system and concludes with some specific directives for guiding empirical analysis. The economic theory of international trade is conventionally divided into two branches: the pure theory of international trade and the monetary theory of balance-of-payments adjustments. The modern theory of international trade has a more comprehensive theory of prices and costs, explaining differences in comparative costs as the result of differences in the ratio in which countries are endowed with factors of production.
