FOREIGN MARKETS 



BY CARL COPPING PLEHN 



[Carl Copping Plehn, Associate Professor of Finance and Statistics, and Dean of 

 the College of Commerce, University of California, b. Providence, Rhode 

 Island, June 20, 1867. A.B. Brown University, 1889; A.M. and Ph.D. Uni- 

 versity of Gottingen, Germany, 1891. Professor of History and Political 

 Economy, Middlebury College, Vermont, 1891-93; Assistant Professor of 

 History and Political Science, University of California, 1893-96; Chief Sta- 

 tistician to United States Philippine Commission, 1900-01. Member of 

 American Economic Association. Author of Introduction to Public Finance; 

 The General Property Tax in California; The Finances of the United States 

 in the Spanish War, etc.} 



PART I 



A Review of Recent Developments in that Part of Economic Theory 

 which relates to Foreign Markets 



THAT part of the theory of political economy which relates to 

 foreign markets - - the theory of international trade and the theory 

 of foreign exchanges - - has had, of late years, an appearance of 

 finality which has been conspicuously absent from some other parts 

 of economic science. This stability has endured while the theory of 

 distribution - - the rational explanation of rent, interest, and wages 



has been a sea of raging storms; it has endured while the theory of 

 value, which Mill regarded as so nearly perfect, even in his day, has 

 been subjected to extensive revisions, in phraseology if not in sub- 

 stance; and while even the theory of prices, so much more nearly 

 related to that of international markets, has been subjected to attack. 

 During all this time, through all this turmoil, the theory of inter- 

 national trade, as set forth by Mill, and that of foreign exchanges, as 

 expounded by Goschen, have remained well-nigh unaltered and little 

 criticised. A review of the latest text-books and treatises shows us 

 the same old theories, unchanged save in some slight details. For 

 the present, therefore, we may assume that the theory of these two 

 subjects is fairly satisfactory to economists as serving their purposes 

 and explaining the more important features of foreign trade. 



Although the generally accepted theory of international trade is 

 in the main the same as it was fifty years ago, there is a tendency 

 among recent writers to make a change in emphasis. The theory of 

 comparative cost, or relative advantage, as the element chiefly deter- 

 mining the direction of trade, is so striking that it is apt to receive 

 more emphasis and to be given seemingly a more important place 

 than it really deserves. It is, of course, true that relative advantage, 

 entirely irrespective of absolute advantage, may, and in many cases 

 does, determine what goods a nation will produce for export and 



