The Nobel Prize in Economics was awarded yesterday to a Swede and in Englishman for their pioneering work in the study of economic relations among nations, including why countries import some goods and export others!
The Swedish Royal Academy of Sciences said that Bertil Ohlin, 18, a retired professor at the Stockholm School of Economics and leader of Sweden's Liberal Party for 23 years, and James E. Meade, a retired Cambridge University professor, would split the $145,000 prize.
Ohlin's major theoretical contribution came in the 1930's, while Meade's work on international trade and balance of payments problems was done in the early 1950s.
It was not until the 1960s and the 1970s - as nations' economies became increasingly interdependent - that the importance of their work became obvious, the Royal Academy of Sciences said in annouuncing the award.
The Nobel Prize in Economics was the last of six Nobel awards made this year. The economics award is the only one not financed by an endowment from the estate of AAlfred Nobel, the Swedish inventor of dynamite.
The economics prize was established in 1969 and is funded Sweden's central bank.
Ohlin is considered the founderrre of the modern theory oof why nations produce some goods for export and buy other goods from a broad. His classissisc work is "Interregional and International Trade," published in 1933.
Ohlin and his teacher, Eli Heckscher, moved international trade thoery from looking only at the relative amount of labor imput in the prodution of goods as the explanation of why they are imported oor exported to a broader look at all the factors of production, such as land and capital.
IN some situations, the reason a country imports or exports a good is self-evident. A country with no oil must import oil.
But Japan, for example, which has no coal and iron ore and exports steel.
The Heckscher-Ohlin concept is the modern theory of comparative advantage, according to Catholic University economist John J. Murphy, an expert in international trade and capital flows.
Countries will export in which they have a production advantage relative to their neighbors and import those goods where another country has a comparative advantage.
For example, steel production requires large amounts of capital relative to workers, while textile manufacture requires large amounts of labor relative to capital and land. Wheat production requires large amounts of land relative to capital and labor.
Thus, Japan exports steel. Hong Kong exports clothing and Canada exports wheat.
The Heckscher -Ohlin theory is far from perfect. Murphy noted that it assumes all countries have the same lavel of technology and sophistication of work force.
Tests of the theory by 1973 Nobel laureate Wassily Leontirf have poked factual holes in it, but, by and large, most economists think the Heckscher Ohlin theory of why trade takes place is valid.
Ohlin served as Swedish Commerce Minister in a four-party coalition government in 1944 and was head of the Liberal party from 1944 until 1967. IN an interview, Ohlin said he "would like to be remembered for my initiatives that atalled excesses of socialism.%
Meade, was among bright graduate students studying under John Maynard Keynes at Cambridge when Keynes write the landmark General Theory of Employment. Interest and Money, which revolutionized modern economic analysis.
Meade "has demonstrated the effects of economic policy on foreign trade and penetrated the problems of stabilization policies in 'open' economies," the Royal Academy said.
Meade, in two major works in the early 1950s, showed that economies with more than one goal - say full employment, price stability and balance of payments equilibrium - need more than one economic tool - say fiscsl ?spending and taxing) policy, monetary policy, monetary policy and currency devaluation - to reach those goals.