ABSTRACT
Much of international trade theory has been prescriptive, directed at formulating policy proposals to present to policy makers. In the course taken by the modern theory at least up to the mid 1970's and then as subsequently pursued in a substantial part of the literature, free trade has been presented as the recommended trade policy, subject to qualifications deriving from the identification of various ‘distortions’ which underlie market failures. It has been commonplace to use the theoretical demonstration of the possibility of distortions and market failures to propound corrective interventionist policies. The policies are to be carried out by a benevolent omniscent planner who cares but for efficiency; or if income distribution is a concern for the omniscent planner, the theory allows him the use of lump-sum transfers (which do not disrupt factor-supply incentives) to maximize his conception of social welfare.
