ABSTRACT
This chapter is concern with the interacting linkage between movements in the terms of trade and economic development. A good deal of Arthur Lewis' work has focused on the connections between the terms of trade and economic development: both the com modity terms of trade and the factoral terms of trade measuring relative physical productivity. In a majestic, parochial tour de force, conventional expositions of the theory of international trade, rooted in Ricardo and the more static propositions of Torrens, have managed down to the virtually to set aside the variables required to understand movements in the terms of trade. Lewis' analysis of relative price movements in the period 1870-1913 is, a model of how one must proceed if the intent is to understand and explain the terms of trade movements that actually occur. The elaboration of neo-classical growth theory, from its base in the Harrod-Domar model, has led to formal expositions of the effects of economic growth on trade.
