Here I record what I have been able to learn about the origins of some of the terms we use in international economics, both who introduced their meanings and who first gave them their names, if those are not the same people.
If I attribute a concept or the term for it to a particular author, that means I have personally checked the source and seen it used there in the way that I describe. However, if I say or imply that this was the first use of a concept or term, I obviously cannot always know that for certain. For most of these, I have searched in Google Scholar to find the first use of the term identified there. But I don't know how complete that tool is (it seems remarkably good), and in any case I can't find who may have used a term orally with their colleagues or students without publishing it earlier. If you know of prior uses that should be mentioned, please let me know, preferably by e-mail to alandear@umich.edu. |
Aggressive unilateralism | |
The term itself appeared three times prior to 1990, in writings by Carlton and Bixler 1962, Carlton 1963-64, and Etzold 1982, but always in the non-economic context of the Cold War and military conflict. For example, Carlton and Bixler worried that the American right wing would "come to power in the United States and build a garrison state, pursue policies of aggressive unilateralism, ...."
In the context of economics and trade policy, the term was coined by Bhagwati (1990), who also used it that same year as the title of a volume that he edited with Hugh Patrick. |
Asian Tigers, Tiger economy | |
I've not been able to track down the first use of this term to refer to the foursome of Hong Kong, South Korea, Singapore, and Taiwan. Everywhere I've seen the term used in writing, the author seems to assume that it is already familiar. The earliest source for "Asian Tigers" in Google Scholar is a book first published in 1983, but I've found only the much later 8th edition, and I suspect that the term did not appear in much earlier editions.
Google also finds a mention of tiger economies in a paper on Southeast Asia in the 1985 Philippine Journal of Third World Studies, but I haven't been able to access that journal to see if they are named there. I suspect not. So the earliest explicit use of Asian Tigers to mean these four countries seems to be in 1987, and in that year it appeared twice. Rabushka (1987) had the following: "The four Asian Tigers -- Hong Kong, Singapore, Taiwan, and Korea -- are renown [sic] as the hyper-growth economies of the Pacific Rim." and Griffith (1987) had
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Atlas method | |
The Atlas method got its name from its use in the World Bank Atlas, more recent editions of which are called the Atlas of Global Development.
The current method seems to have been used first in the 1985 edition of the Atlas, where it said "...the procedures for estimating gnp in U.S. dollars differ from those used in previous years." Previous editions had used average prices and exchange rates from a three-year base period, whereas the new procedure was to use "the simple average of the exchange rates for the current year and for the two preceding years; the latter two exchange rates are adjusted for differences between domestic and U.S. inflation." The most important difference between the new and old methods was that the old one used a different conversion for a given year in successive editions of the Atlas, making comparisons difficult. I am unable, from reading details of the prior procedure, to tell whether the new one also causes other differences. In any case, it seems that the subsequent use by others of the Atlas method has been to use the method introduced in World Bank (1985). In an effort to determine whether the Atlas method had a prior history, I have used Google Scholar to search for Atlas method over various years. The term itself was used with other meanings prior to its use by the World Bank, as well as subsequently: a method of measuring the maturity of skeletons; a method in meteorology for detecting weather events; a tool for measuring the "HLB value of a reagent," whatever that is, by Atlas Chemical Industries; and an exercise program by body builder Charles Atlas. The earliest mentions of the World Bank's Atlas method were in 1980, where I found two. One of these (by M.Y. Smith, "Romania: forecasting and development," in Futures) mentioned "following the World Bank Atlas method of adjusting official Romanian national accounts data." The second (by Davies, Grawe, and Kavalsky, "Poverty and the Development of Human Resources: Regional Perspectives," World Bank) had a table of GNP per capita data labeled "IBRD Atlas method, US dollars." From these it appears that the term Atlas method predated the version of World Bank (1985) and referred to the method used in prior editions, which seems to have been slightly different. |
Balance of trade | |
Price (1905) examined the origins of this concept, the exact wording of which appeared in 1615 and the concept of which, without the wording, can be found as early as 1381 in England, when writers were concerned that by importing a greater value than it was exporting, England was losing money -- i.e., gold and silver. Somewhat before the term balance of trade appeared, similar concerns were said in 1601 to be due to "overbalancing of foreign commodities." From the discussion by Price, it appears that balance of trade in this early use referred to a situation in which values of exports and imports were equal, rather than today's use measuring the extent to which they are unequal.
Fetter (1935) dated the term to 1623, apparently disagreeing with Price that its use in 1615 was comparable. His main concerns were with the common attribution that a positive balance of trade is "favorable" and with whether the term includes only trade in goods or instead extends beyond that to include other payments such as we today would include in the balance on current account or even balance of payments. It appears that early writings used the term variously in each of these senses. [I was alerted to the articles by Price and Fetter by Obstfeld (2012).] |
Banana republic | |
As explained nicely in Economist (2013), the term was coined by the writer O. Henry in a short story in 1904, set in a fictional land he described as a "small, maritime banana republic." He was living at the time in Honduras, on which he must have based his description. Honduras was and remains one of the countries that rely heavily on plantations of bananas, owned by what was then the United Fruit Company, now called Chiquita.
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Beggar thy neighbor | |
It has become commonplace, at least in the literature of economics, to describe policies that decrease imports as beggar thy neighbor policies. These policies include most obviously increases in import tariffs and artificial depreciation of currencies. The basis for this label is that these policies can benefit the home country only by hurting its trading partners. Today we most commonly interpret those effects as changes in overall economic welfare, but historically the term was first used during the Great Depression, when the effects were on employment.
The origin of the term was nicely discussed by Weisman (2009), who credited it to Joan Robinson (1937), whom he thanked "for such a vivid phrase." He also pointed out that she likely got the phrase from a 19th century card game, Beggar My Neighbor, of which he said the "first literary appearance ... was in the novel Great Expectations, published in 1861" by Charles Dickens. That is especially plausible given that Robinson herself never used the term beggar thy neighbor, but only >beggar my neighbor. It appears in the title of her essay, "Beggar-my-Neighbour Remedies for Unemployment," and in several passages as the "game of beggar-my-neighbour," such as (p. 156):
The first use of the term that I can find in a context of international trade showed up in an un-authored piece, perhaps an editorial, in the Honolulu, Hawaii, Daily Herald, June 3, 1887. An article titled "The Sugar Industry" discussed how multiple countries were exporting sugar at below their domestic prices and less than the cost of production (what today we would call dumping), "the idea apparently being to ruin the British refiner at the expense of the foreign taxpayer." Before that it says, "It is a singular game to play something like that known as beggar my neighbor." While the context was trade, the objective was clearly not what we would mean by it today. The first clear use of the term with today's trade meaning preceded Robinson (1937) and was by Reynolds (1934, p. 180):
It is therefore not certain that Robinson should have the credit that Weisman gives her for introducing the term beggar my neighbor (not beggar thy neighbor) to the literature on international trade. But to the extent that the term caught on, it does seem likely that Robinson's greater visibility compared to Reynolds and Elliott would have been the cause. And catch on it did. In the decade 1940-49, Google Scholar finds at least 18 articles including beggar my neighbor in the context of international trade, including six in the American Economic Review. The peak was five articles in 1947. But that is not the term that is most widely used today. Instead beggar thy neighbor has largely replaced beggar my neighbor, as we can see from Google's NGram of the two terms:
![]() The surge in appearances of beggar my neighbor in the 1800s presumably reflects the popularity of the card game, which then declined. One sees the rise in its use in the 1930s and 1940s, perhaps showing its rise in the context of international trade, which took off even more in the 1950s and 1960s. But beggar thy neighbor appeared for the first time in the 1940s, then took off in the late 1960s, and it has dominated beggar my neighbor ever since. Searching for appearances of beggar thy neighbor in Google Scholar, the first I find is Berge (1946, p. 687) who wrote, in discussing the Great Depression:
It was not until the early 1950s that beggar thy neighbor began to appear in the economics literature, first by Hildebrand and Mace (1950) in Review of Economics and Statistics and then by Kindleberger and Despres (1952) in American Economic Review. The latter included (p. 332)
But why did he or someone else feel the need to change beggar my neighbor into beggar thy neighbor? I can only offer my own speculation, which others may find either obvious or silly: The card game that seems to have started all of this was all about deliberately eliminating the other players in order to win the game. So beggaring one's neighbor was not only the object, but something to be applauded. Thus it was desirable for one to focus approvingly on the negative effects one could have on one's own, i,e. "my," neighbor. But as the game came to be used as a metaphor for destructive competition, the focus shifted to the negative effects that others would have on ourselves, and therefore the perspective moved to that of the neighbors. Beggar thy neighbor therefore speaks disapprovingly from the neighbor's point of view and stresses that negative connotation. As the NGram chart above shows, beggar my neighbor has not entirely disappeared. And while economists generally disapprove of uses of trade and exchange rate policies to benefit oneself at the expense of others, there are undoubtedly some who still -- from a nationalist perspective and discounting the likelihood of retaliation -- favor such actions. It would be interesting to see whether current uses of beggar my neighbor tend to correlate with that point of view. Perhaps those who use beggar my neighbor in the context of international trade continue to see trade as a zero sum game, which the original Beggar My Neighbor game certainly was, while those who recognize that international trade is a positive sum game have shifted to beggar thy neighbor.
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Belt and Road Initiative | |
China's President Xi announced the beginnings of what is now called the Belt and Road Initiative in 2013 visits to Kazakhstan and Indonesia. It ultimately was to include two parts. The Silk Road Economic Belt, announced in 2013, would be a network of rail, pipelines, and roads together with improved border crossings through Central Asia, South Asia, and Southeast Asia. The Maritime Silk Road, announced a bit later at a summit of ASEAN, would consist of development of ports in Southeast Asia, the Indian Ocean, East Africa, and even Europe.
Together these two parts were named One Belt, One Road. The purpose was not just to facilitate greater trade between China and other countries, but also to increase China's influence in those countries and even to foster greater use of the Chinese currency. The change to calling it the Belt and Road Initiative in English is explained in this passage from The Economist, June 11, 2022:
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Benign neglect | |
This term cropped up only occasionally prior to 1970, and never in reference to policies regarding the balance of payments. Google Scholar finds it less than once a decade during 1800-1899 and less than once a year during 1900-1969, on topics as diverse as public interest law, African newspapers, and spiders. One source credited the term to "Earl of Dunham's prescription in 1839 for the proper British attitude toward Canada."
Then suddenly in 1970, Google Scholar finds 100 occurrences of the term in that year alone, though still never in an international economic context. This explosion of uses of the term followed wide reporting of a memo by Daniel Patrick Moynihan, counselor to President Nixon. Moynihan wrote:
In 1971 there were at least nine uses of the term benign neglect with the meaning used here: that the US either was doing or should have been doing nothing about its balance of payments deficit, leaving policy responses to other countries. Many of the authors who used the term put it in quotation marks, but none of them said whom they were quoting, if anybody. Many were critical of the policy itself, referring to "experts" or "economists" who advocated the policy, but mostly without naming them. The policy of benign neglect, but without that name, was attributed by Halm (1968) to Despres, Kindleberger, and Salant (1966). According to Halm, p. 1:
After discussing this "minority view" extensively, Halm concluded that "The solution suggested by the minority view suffers from several weaknesses, which make it unlikely that it can supplant or even decisively influence the majority view," and he went on to list 12 "points of contention." Later writers more frequently credited the policy, though again not the name, to Krause (1970) who advocated "A Passive Balance-of-Payments Strategy for the United States" in an article with that title in Brookings Papers on Economic Activity. Krause too, however, made no use at all of the words "benign" or "neglect." Instead, it seems to have been Haberler and Willett (1971), also arguing for a "passive balance of payments policy," who then went on describe it as a "policy of benign neglect":
Rather surprisingly, neither Krause nor Haberler and Willet cited either Depres et al. (1966) or Halm (1968), even though the policy they advocated seems the same as that of the former. The Haberler and Willett paper was dated January 1, 1971, only a few months after Krause, and neither of these papers mentioned the other. So it appears that they may have arrived independently at the same policy recommendation both as each other and as Depres et al. As for calling it the policy of benign neglect, that seems to have originated with Haberler and Willet. Halm in his title had mentioned "deficits benign and malignant," but it does not appear that Haberler and Willet took the word "benign" from him, since they do not cite him. Instead, I conclude that Haberler and Willet were the first to apply the already familiar term benign neglect to US balance of payments policy.
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Boycott | |
Very nicely explained by Mulder (2022, p. 37):
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Canonical model of currency crises | |
Krugman (1997a) gave credit for this model, which he seemed in this source to be the first to call the canonical model, to apparently unpublished "work done in the mid-1970s by Stephen Salant, at that time at the Federal Reserve's International Finance Section." Salant focused on schemes to stabilize commodity prices, as described briefly in Salant and Henderson (1978). There it was applied to the market for gold. Krugman then drew on that work for his model of currency crises in Krugman (1979b), and it was refined by Flood and Garber (1984).
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Carousel approach | |
Also called carousel retaliation, this was introduced to US legislation in 1999 by a group of senators led by Mike DeWine of Ohio and a group of representatives led by Larry Combest of Texas. The Senate bill was "S. 1619, the Carousel Retaliation Act of 1999." I have not been able to locate that, but it seems to have been the first use of this term. The bill was a response to concern that the retaliatory tariffs used by USTR in the beef hormone case would not be effective, and it was introduced as an amendment to Section 301. The following year, the content of the bill, but not its name, was included in P.L. 106-200, May 18, 2000, the Trade and Development Act of 2000.
Since then, carousel has continued to be used in this context, including as a verb: "to carousel the tariffs." For for more on this history of the carousel approach, see Griffin (2019).
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CES function | |
Arrow et al. (1961, pp. 225-226) described their empirical motivation to "derive a mathematical function having the properties of (i) homogeneity, (ii) constant elasticity between capital and labor, and (iii) the possibility of different elasticities for different industries." They named it the CES function and estimated it across industries and countries.
One of the co-authors, Minhas1962, tried to rename it the "homohypallagic" function, deriving from Greek homo=same and hypallage=substitution. He credited the idea for this name to Emmanuel G. Mesthene of the Rand Corporation. The name did not catch on. Mukerji (1963) also tried to rename it the "SMAC function," using the initials of the four authors of Arrow et al. (1961) -- Solow, Minhas, Arrow, and Chenery -- but that too failed to catch on. The CES function did not play a major role in international trade theory during the first decade or two after its introduction, perhaps because trade theorists had a proud tradition of deriving results without specifying functional forms. It came into its own, however, in the Dixit-Stiglitz function used by Krugman (1980) as central to incorporating monopolistic competition into the New Trade Theory. The innovation there was to make the number of products (interpreted as varieties) variable. |
Comparative advantage | |
Ruffin (2002) credited the concept of comparative advantage and the law of comparative advantage to Ricardo (1951-1973), in a discovery that Ruffin dated to early October 1816. The law was developed in Ricardo's celebrated chapter on foreign trade, while the term comparative advantage seems to have first appeared in a later chapter (Ricardo (1951-1973), Vol I, p. 263). In crediting Ricardo, Ruffin disagreed with Chipman (1965) who credited Torrens (1815). From what I see in this debate, Torrens deserves credit for first stating the possibility that a country will import a good in which it has an absolute advantage, even though he seemed not to have recognized its importance, and he certainly did not work out the full conditions needed for this to happen, as Ricardo did.
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Continuum of goods | |
The first to model trade with a continuum of goods were Dornbusch, Fischer, and Samuelson (1977), who also used that term in their title. They cited an unpublished paper by Charles Wilson, also dated 1977, that further explored their model, but in the published version of that paper, Wilson (1980) credited them with having suggested this modification of traditional trade theory. This approach was admired but not used extensively by others until Eaton and Kortum (2002) replaced deterministic continuous functions for productivity with stochastic distributions in what is now the widely used EK Model.
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Currency area | |
Mundell (1961, p. 657) spoke of "...defining a currency area as a domain within which exchange rates are fixed...". Perhaps because the exchange rates among separate national currencies are seldom if ever truly fixed, the term has come to mean a group of countries that share a common currency. Mundell also coined the term "optimum currency area" which is now more commonly expressed as optimal currency area.
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Deadweight loss | |
This term for the efficiency costs of a tariff or other market imperfection was introduced to the literature by Samuelson (1952, p. 294):
The latter appeared in Samuelson (1960) in which he honored Harold Hotelling. Perhaps coincidentally, Hotelling (1938) is one of two sources that I came across that used "dead loss" to mean the efficiency loss due to a tax. This suggests to me that Samuelson may have introduced deadweight loss as an improvement over "dead loss," since the latter is used with other meanings in other contexts. Because of that, I've found it difficult to search for others who may have used "dead loss" with this particular economic meaning (more commonly it simply means an activity that is not successful). But I did happen across Bickerdike (1906) who used it precisely for the triangle of unrequited consumer loss due to an import tariff:
Whatever may have motivated Samuelson, his use of the term certainly caught on. Whereas my search for the term prior to 1950 found nothing, and in 1951-1960 found only the several articles by Samuelson, in 1961-1970 it appeared 26 times, almost all by authors other than Samuelson and with his meaning. There is less consensus on whether to render the term as 1) deadweight loss, 2) dead-weight loss, or 3) dead weight loss. Samuelson himself, in Samuelson (1960), used both the first and the second on the same page (p. 24). A Google-Scholar search over 1970-2016 finds more than twice as many of the first (17,600) as of the second and third combined (7,580).
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Depression, The Great Depression | |
Mendel (2009, an intern at the History News Network, reported that the term depression was being used for an economic downturn as early as US President James Monroe in 1819, referring to what has been called the Panic of 1819 and its bank failures and currency depreciation. Monroe also used the phrase great depression in his 1820 Fourth Annual Message. Other presidents after Monroe -- including Grant, Hayes, and Coolidge -- used the terms as well, prior to Herbert Hoover, who is often credited with introducing the term in preference to the more common "panic."
Although Hoover referred to the world has experiencing "a great depression," he did not give it the name The Great Depression. That seems to have been coined by Robbins (1934). |
Diversification cone | |
Dixit and Norman (1980, p. 52) attributed this to Lerner (1952) and McKenzie (1955). I see nothing in Lerner to justify this. McKenzie, however, made considerable use of the concept in the form of a set of factor endowments within which factor price equalization occurs, though he did not give it a name. Since he projected factor requirements and factor endowments onto a simplex, his set appeared as a triangle, though a cone was implicit. I do not yet know who may have preceded Dixit and Norman in using this term.
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Dixit-Stiglitz utility | |
This refers unambiguously to the model of monopolistic competition introduced by Dixit and Stiglitz (1977) and to the similar model of Spence (1976) that led this sometimes to be called Spence-Dixit-Stiglitz utility. What is less clear is exactly what is meant by either term. The term Dixit-Stiglitz utility did not appear in publication until 1987, when it then appeared more than once but with slightly varying meanings. The varying meanings have continued since then, but the commonality among them is
Dixit and Stiglitz (p. 298) started with a somewhat general form for utility, u=U(x0,V(x1,x2,x3,...)), where the range of products was left unspecified but greater than the number of products actually consumed, n. They then considered several special cases, the one usually adopted by others being a CES form for the function V: u=U(x0,{Σinxiρ}1/ρ). What was crucial and distinctive about either form was that the number of products (often called varieties) consumed, n, was variable. Neary (2004) noted that later users of Dixit-Stiglitz utility combined three assumptions that Dixit and Stiglitz themselves mentioned but never used in combination: symmetry of V in xi, CES form for V, and Cobb-Douglas form for U. He therefore suggested that the following should be called "Dixit-Stiglitz lite":
In fact later users have often omitted the numeraire good, x0, or replaced it with other goods. And the symmetric CES function with variable n has, by itself, come to be what is most commonly regarded as the Dixit-Stiglitz utility function, or sometimes the Dixit-Stiglitz subutility function. In that case the Dixit-Stiglitz utility function appears identical to the CES function, the only difference being the interpretation of n as variable. The function has also been used frequently for production, with the xi as intermediate inputs, following Ethier (1982). The number of varieties was again variable and contributed to the value of the function, which in this case was output. However, Ethier made the role of n in productivity explicit with a second parameter, and his production function was:
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Dumping, Anti-dumping | |
The word dumping began to be used in 1903 with essentially its current meaning of an unfairly low export price. Prior to 1903 the word was seldom used in the context of international trade (based on my Google Scholar search), and then primarily in combination with another word, such as "dumping ground" or "dumping field," in speaking of disposal of surplus product.
The term came into frequent use in 1903 in several books that were published in that year, such as Ashley (1903), and especially in the speeches of Joseph Chamberlain. In a speech on tariff reform in Liverpool on October 27, 1903, he defined dumping and stressed its harm to free-trade Britain:
Although the definition of dumping is today codified in the WTO and in national anti-dumping statutes, its definition has been subject to some dispute. Viner (1923) examined several alternative definitions and concluded in favor of "price discrimination between national markets" (p. 3). This deliberately included selling for different prices in different foreign markets and selling at home for a lower price than abroad. He called the latter practice "reverse dumping," and then had to identify the more common opposite practice as "export dumping." Finger (1993), who has argued that any industry can secure anti-dumping duties if there is political will, prefered to define dumping as "whatever you can get the government to act against under the antidumping law" (p. vii). The first anti-dumping law was enacted in Canada in 1904, as part of amendments to the Customs Tariff Act of 1897, according to Ciuriak (2005). As reported there, the legislation made no use of the words dumping or anti-dumping. and merely provided that imports should be subject to a "special duty of customs equal to the difference between such fair market value and such selling price." The first use that I've found of anti-dumping was Shortt (1906), writing about the Canadian policy. That the term caught on may not be surprising, but note that the other WTO-permitted unfair trade policy, directed at subsidized exports, is called a countervailing duty, not an anti-subsidy duty.
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DUP activity | |
Bhagwati (1982) introduced this acronym for directly unproductive profit-seeking activity. After listing a variety of activities that fit this description, including rent seeking, revenue seeking, and others, he said (p. 990), "Thus, these are aptly christened DUP activities."
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Dutch disease | |
Term was coined by The Economist in an article "The Dutch Disease" in the issue of November 26, 1977, pp. 82-83, which included the passage "... in the words of Lord Kahn [1905-1989], 'when the flow of North
Sea oil and gas begins to diminish, about the turn of the [21st] century, our island will become desolate.' Any disease which threatens that kind of
apocalypse deserves close attention." The article attributed the problems of the Dutch economy (an external appearance of strength but internally high unemployment and a declining manufacturing sector) to "three causes, only one of them external." These are (1) a strong currency; (2) high industrial costs; and (3) use of government gas revenues to increase spending rather than investment. As used since, the term has been focused primarily on the real exchange rate. The term was used by Corden and Neary (1982), whose reference to it as "... sometimes referred to as the 'Dutch Disease'" suggested that it had passed into common usage.
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Economic weapon, the | |
Mulder (2022) said as he discussed the UK's Advisory Committee on Trading and Blockade in Time of War, "Its Legal Subcommittee included Cecil Hurst, the Foreign Office legal adviser who was probably the first to use the term 'the economic weapon' in 1912." Since Mulder wrote the book on the topic, he's likely correct, and I find nothing to indicate otherwise.
Google Scholar finds only two occurrences of the economic weapon prior to 1912, and these were both in the context of industrial-labor relations, where the term refered to economic actions such as strikes that workers might use against their employers. The first occurrence I find of the term meaning an economic substitute for military action against other countries was Adams (1915, p. 219):
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Edgeworth-Bowley box | |
The origins of this were examined by Tarascio (1972). The diagram was first drawn by Pareto (1906), based originally, though only very partially, on a diagram of Edgeworth (1881). Edgeworth's diagram was not a box at all, and was drawn on axes more approptiate to an offer curve than to exchange of fixed quantities of goods or factors. Edgeworth's purpose was to define and depict the contract curve, which today we almost always draw within the box diagram.
Bowley's name was added to the name of the diagram as a result of Bowley (1924), who drew indifference curves for two individuals, one rotated clockwise 90 degrees and the other counterclockwise, thus forming the outline of a box, within which he showed Edgeworth's contract curve. That is probably why his name came to be associated with Edgeworth's. However, Bowley did not claim originality, and while he cited Edgeworth for the contract curve, he neither named nor attributed the box diagram. Indeed, in his own diagram showing exchange, his focus was on the internal portion and he did not extend the axes of his two indifference maps far enough to touch or cross, and therefore did not actually produce a box. Had he done so, his box would have been a mirror image of the one we normally draw today. It was Pareto (1906), writing in Italian that was soon translated into French, who had actually been the first to draw and use the box diagram. It is unclear whether his contribution was known to Bowley and to others writing in English until later. His diagram, displaying indifference curves for two consumers, one drawn conventionally and one rotated 180 degrees, formed the box very much as we know it today, for exchange between consumers. With each consumer endowed with only one of the two goods, he showed a trade equilibrium as a common tangent to two indifference curves that were also tangent to a price line from the consumers' endowment point. I have searched in Google Scholar for "Edgeworth box," "Edgeworth-Bowley box," "box diagram," and the joint appearance of "Edgeworth" and "box." The last of these gets many hits, of course, but none of them were about the Edgeworth box, until Stolper and Samuelson (1941). Their Figure 2, p. 67, had labor and capital on the axes and isoquants for two industries inside. Of this they said:
Based on all of this, it appears that the box applied to consumption, as well as the Edgeworth production box, have both often been called just the Edgeworth Box, even though Edgeworth never drew either. Calling it the Edgeworth-Bowley box is only slightly less erroneous, since Bowley's version of the box was incomplete and perhaps accidental. Pareto was more deserving of having his name on the consumption version of the box diagram than either Edgeworth or Bowley. Stolper and Samuelson, if they needed further recognition, should share credit for the application to production that has played such a large role in international trade theory. And it seems likely that they, too, were the ones who led us to call it the Edgeworth or Edgeworth-Bowley box ever since.
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Emerging market | |
According to The Economist (October 7, 2017), "The term was coined by Antoine van Agtmael in 1981 when he was working for the International Finance Corporation (IFC), a division of the World Bank." As explained there, he pitched the idea of a "Third World Equity Fund" -- which would give foreign investors easier access to stock markets in places like Brazil, India, and South Korea -- to a group of fund managers. Some were intrigued, but hated the name. "So Mr Agtmael spent the weekend dreaming up the term ''emerging markets', with which he hoped to evoke 'progress, uplift and dynamism.' That label proved wildly successful."
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Flying Geese | |
The name Flying Geese Model or Paradigm derived from a graph of Akamatsu (1961), (but 1937 in Japanese) that resembled a formation of flying geese. The graph showed paths over time of a developing country's imports, production, and exports of a product, similar to the product cycle.
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Fragmentation | |
As used to mean a splitting up of production processes, the term fragmentation was first introduced by Jones and Kierzkowski (1990), who started their analysis by noting (p. 31) that increasing returns and specialization encourage a growing firm to "switch to a production process with fragmented production blocks connected by service links.... Such fragmentation spills over to international markets." [Italics in original.] Many other terms have been used with the same, or related, meanings, as listed here, but fragmentation seemed to have caught on most widely in the 1990s academic literature. More recently, a more common choice seems to be global value chain, or just supply chain, even though these seem to connote a more linear succession of inputs-to-inputs-to-inputs, rather than a splitting up into multiple inputs at the same stage of production.
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Gravity model | |
What we now call the gravity model of bilateral international trade flows first appeared independently in Tinbergen (1962) and Pöyhönen (1963), but neither used the word gravity. Tinbergen's formulation was very similar to the formulation of the basic model used today:
Pöyhönen was member of the same Finnish research team as Pulliainen (1963) whose formulation was more like Tinbergen's. While he also did not call this a gravity model, he did mention the parallel: "The results of our empirical study show that the structure of international trade is capable of description in terms of gravitational theory." (p. 88). This analogy to gravity was actually resisted by another early user of the model, Linnemann (1966), on the grounds that force of actual gravity falls with the square of the distance between objects. He followed the above authors in setting out an equation much like the above, with Y's replaced by "potential supply" and "potential demand" which he went on to explain in terms of both GDP and population. But in his footnote 43 (pp. 34-35) he remarked, "Some authors emphasize the analogy with the gravitation law in physics, and try to establish that [α3=−2]. We fail to see any justification for this." And in the rest of his book the only mention of gravity regards the "centres of gravity" of the countries considered, used for defining distance between them. The first to call this a gravity model seems to have been Waelbroeck (1965), which included (p. 499) "Hypothesis 2: The gravity model: distance, export push, and import pull" and has the equations from the other three authors. Waelbroeck notes that "There is, as has been pointed out, an odd similarity between formulae (6) and (7) and the law of gravity, with Yi and Yj playing the role of masses, and this justifies christening the model as the gravity, or G, model." He did not say where it was "pointed out," but it seems likely that he was referring to Pulliainen (1963). Predating all of this explicit application to bilateral trade between countries, however, the term gravity model was used in other social science contexts, and models of this form were used, under other names, in other applications. Bramhall and Isard (1960), in a chapter of a volume on regional science, discussed "gravity, potential, and spacial interaction models -- which for short we shall term gravity models." Similar to other earlier applications that do not seem to have used that name, they formulated the number of trips between areas with different populations, using populations instead of GDPs. Another later source, Glejser and Dramais (1969), cited gravity models as having been used for a long time in literatures on migration, tourism, and telephone calls as well as trade. In a series of papers starting with Zipf (1946), Zipf applied what he called "The P1P2/D Hypothesis" to inter-city movements of freight, persons, information, and perhaps more. Stewart (1947) included in his "Empirical Mathematical Rules Concerning the Distribution and Equilibrium of Population" a formula similar to gravity, but called it "potential." He also cited a much earlier author, Reilly (1929), who provided a "law of retail gravitation," but that was for explaining the market regions covered by cities of different sizes, not the transactions between them.
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Great Moderation | |
This term, as applied to the moderating of economic fluctuations from the 1980s to 2007, seems first to have been used by Stock and Watson (2003). They used the word "moderation," not capitalized and without the adjective "great," throughout the paper, but the title of their section 3, p. 170, was "Dating the Great Moderation."
The term was picked up, and probably made much more visible, by Ben Bernanke in his Remarks at the meetings of the Eastern Economic Association in Washington, DC, February 20, 2004, when he was a member (but not yet Chair) of the Board of Governors of the Fed. See Bernanke (2004). He cited several authors as having documented the decline in volatility, the first being Kim and Nelson (1999) who cite McConnell and Perez-Quiros (2000), in a 1999 Fed working paper, as having documented the decline in a linear formulation rather than a structural shift. McConnell and Perez-Quiros, in turn, started their paper with "The business press is currently sprinkled with references to the 'death' or 'taming' of the business cycle in the United States." Neither of these papers used the term Great Moderation, or even the word moderation. So it appears that the phenomenon represented by the Great Moderation was noted gradually over time and then documented by a number of scholars. The name for it as well as one of the more rigorous documentations of it were by Stock and Watson (2003).
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Grexit | |
This term first appeared in print in Buiter and Rahbari (2012). DeTraci Regula, in an undated posting on About.com, suggested that the term was coined by the second author, Citigroup's Ebrahim Rahbari. She also pointed out the prior existence of GrexIt.com, an e-mail storage and organizing tool. I was told by someone who worked in the EU prior to 2012 that the term was in use there as early as 2010.
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Harberger triangle | |
As a theoretical construction for measuring welfare costs due to market distortions, this idea goes back to Dupuit (1844) and independently to Jenkin (1871-72). Dupuit, pp. 280-282 in the 1969 reprint, very clearly explained how to infer utility from the area to the left of his demand curve (which has price on the horizontal axis), then used that to derive the triangle of net loss from a tax in his Figure 3. Jenkin, p. 113, provided a supply and demand diagram much as we would use today (albeit with the axes reversed and with curves, not straight lines) and also the incidence and welfare effects of a tax. He clearly identified what we would today call the excess burdens of the tax on suppliers and demanders, using the familiar (curvilinear) triangles: "This excess of loss is represented by the area CC"D for the sellers, and C'C"D for the buyers."
Hines (1999) provided a good review of this history. Although several others had used this tool, Arnold Harberger made repeated use of it especially in Harberger (1954) applied to monopolies, in Harberger (1964a) applied to an excise tax, and in Harberger (1964b) applied to other distortions. Although Chase (1964) referred twice to "Harberger's triangle," he did so in an edited volume where he was summarizing another of Harberger's papers that appeared there. The term Harberger triagle then did not appear in print, that I can find, until 1976, even though several authors cited Harberger's papers and his method. Then, in 1976, Bruno and Habib (1976) included
Harberger triangles in trade
For some reason, however, trade economists have tended to prefer the term deadweight loss to identify the costs measured by Harberger triangles in the tariff context.
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Hirschman index | |
This index of trade concentration first appeared in Hirschman (1945). Michaely (1958) misunderstood it as being identical to the Gini coefficient and called it that in his application to exports, while acknowledging that Hirschman had also used it for that purpose. In fact Hirschman's formula, H=sqrt[Σ(xi/x)2], is not the same as the Gini coefficient. As Hirschman (1964) pointed out, his formula reflects not just unequal distribution but also fewness, its value rising the smaller is the number of goods in the summation. I have calculated both measures in a spreadsheet and can confirm that they do indeed yield different values and that the Hirschman index does indeed fall as the number of goods rises, while the Gini coefficient does not. In spite of this, several others followed Michaely in calling it the Gini coefficient or Gini index, until Hirschman published his correction in 1964.
Hirschman (1964) also pointed out that his index differed from what had come to be called the Herfindahl index of industrial concentration only by Hirschman's inclusion of the square root. Herfindahl had introduced his index in Herfindahl (1950). In spite of the fact that Herfindahl himself acknowledged Hirschman's prior contribution, his index was named the Herfindahl Index by Rosenbluth (1955) and the name stuck, even though Rosenbluth later tried to correct the error. Today (June 2022), the Herfindahl index is said by Wikipedia to be "also known as Herfindahl-Hirschman index, and there is no entry at all for Hirschman index." Interestingly, NGram finds Hirschman index used most frequently since 1983, with Herfindahl used most frequently prior to that. Use of Herfindahl-Hirschman index parallels Hirschman index, but somewhat below it. I suspect that NGram includes Hirschman in its findings for Herfindahl-Hirschman. If so then it is clearly Herfindahl-Hirschman that has been most widely used since 1983. ![]() As for the Hirschman index itself and its use for quantifying concentration of trade, it is difficult to search for it in Google Scholar without the Herfindahl, but I was able to find a few sources that used it. For example, Ng (2002), p. 587 said "The related measure used by UNCTAD is the concentration index, or Hirschman index (H)" and then provided the formula above.
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Holy Trinity, Inconsistent Trinity, Impossible Trinity, and Trilemma | |||||||||||||||||||||
These four terms -- and probably more that I haven't seen yet -- have each been used in the literature of international finance to mean the impossibility, or at least the difficulty, of achieving the following three aims simultaneously:
The first to be used for something like this was trilemma, which I only learned about belately. Maury Obstfeld directed me to a passage in Irwin (2012), who had been alerted by Russell Boyer to an early draft of Friedman (1953). It, in a passage not included in the published version, said that the macroeconomic dilemma
The term holy trinity was used with this meaning, but perhaps only once, as it mostly had other meanings even within international macroeconomics. The second, inconsistent trinity, appears to have been the first to be used more than once in published work, in response to the monetary crisis of 1971. The third, impossible trinity, and especially the fourth, trilemma, have been used with this meaning a great deal in recent years. I will deal with each in turn.
Holy Trinity
The second threesome concerns the policy arrangements that may be used to achieve one or more of these attributes:
The earliest use that I have found for Holy Trinity in the context of international monetary economics was a doctoral thesis, Høiberg-Nielsen (1983). This included (p. 116-117),
The term Holy Trinity is of course widely used in a religious context, and also in many other contexts where a threesome is thought to be especially important. In economics, for example, Machlup (1965) and at least one other used it for the "objectives of a stable price level, full employment, and a faster growth rate." My search for the term in Google Scholar is hindered by its wide use in other contexts. But I have looked for it, as well as the other terms considered here, in some of the more widely cited works of both Mundell and Fleming, and I failed to find it. My expectation that I would find it in Mundell was prompted by Rose (1994) who said (p. 1) "This paper is concerned with the compatibility of: fixed exchange rates; independent monetary policies; and perfect capital mobility, Mundell's 'Holy Trinity'." Note though that Rose uses Holy Trinity for the problematic threesome of policies, not the threesome of attributes. I have yet to find any earlier source for this interpretation. On the contrary, I found Eichengreen (1993, p. 621) saying, "In the 1960s and 1970s, most of the literature on the Bretton Woods system was organized around the holy trinity of adjustment, liquidity, and confidence." One might have expected Rose and Eichengreen to agree on the use of the term, since they were both at Berkeley, but apparently they did not. Eichengreen cited Mundell (1969), which did include a section headed "Liquidity, Adjustment, and Confidence," but Mundell did not mention any trinity, at least in that source.
Inconsistent Trinity
Given his prominence -- Wallich had been a member of the US President's Council of Economic Advisors and was later a governor of the Federal Research Board -- I'm not surprised that his use of the word trinity for this threesome led others to use it, even if some may have also called the trinity "holy."
Impossible Trinity That the Impossible Trinity was the policy threesome was confirmed by Frankel (1994), who cited Reisen, and also by Borensztein and Ostry (1994) who did not. So at least until I can confirm from the source that Reisen used the term for the policy threesome, I am comfortable attributing it to him for its current use. Since his own publication seems to be a bit obscure, I am inclined to credit others, such as Rose and Frankel, for the term's subsequent popularity.
Trilemma My own search failed to find it before 1997, but again Maury Obstfeld alerted me to his paper Obstfeld (2020) where he cited columns by Friedman both in Newsweek, Friedman (1979), and in The Economist, Friedman (1983), that used the term. It was unclear in the first of these that this was the same trilemma discussed here, but in the second it was very clear indeed:
I found trilemma first in scholarly published work with its clear current meaning by Obstfeld and Taylor (1997). They said (p. 2):
To sum up, based on the sources that I have learned of, the four terms were introduced into the scholarly literature of international finance, with the current meaning of the threesome of policies above, by the following:
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Home market effect | |
This effect was both introduced and named by Krugman (1980), so there is not much more to say. However, Krugman spoke on p. 955 of "'Home Market' Effects," plural, suggesting that there may be more than one. The two effects that he demonstrated were the following:
First, in a model with increasing returns to scale (IRS), p. 957;
It is worth noting also, as Krugman did in his final sentence, that these results were anticipated by Linder (1961) and by Grubel (1970). Linder did stress the importance of the demand in the home market in order for a country's industry to succeed and export (p. 17): "...a country cannot achieve a comparative advantage in the production of a good which is not demanded on the home market." But rather than stressing IRS, he viewed production functions as differing across countries in response to differences in demand (p. 90): "... the production functions of goods demanded at home are the relatively most advantageous ones." And Linder never spoke of a home market effect. Grubel, in a larger discussion of intra-industry trade, considered products differentiated by quality, with low-quality goods demanded more by low income consumers. Allowing then for IRS as well as differences in the distribution of income across countries, he noted that a country with a preponderance of low-income consumers would "specialize in the production of the low price and low quality model, supplying its own population and exporting to meet the demands of [the other country's] population with below average income."
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Hub and spoke integration | |
Once countries began to enter free trade agreements with multiple other countries that did not have FTAs among themselves, it may have been inevitable that this arrangement would come to be called hub-and-spoke integration. The first use of hub-and-spoke in this context that I have identified was Wonnacott (1990), which included it in the title. The paper itself is no longer available, at least that I can find. I therefore don't know whether Wonnacott merely used the term to describe these arrangements, or went beyond that to formulate an economic model of this sort of integration.
Such a model was certainly provided by Puga and Venables (1995) who also included hub-and-spoke integration as a keyword for their paper. They also cited Baldwin (1994) as discussing such arrangements, although again, as I have so far been unable to access Balwin's book, I don't know whether he even used the term or provided a model. Baldwin was cited by one author, Stawarska (1998), as "the author of the hub and spoke integration model."
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Ideal price index | |
There are two widely used things that are routinely given the name ideal price index. The oldest is the square root of the product of the Paasche and Laspeyre price indexes:
The second item that has come to be called an ideal price index is what can be derived from an explicit utility or production function as the minimum cost, given the set of individual prices of goods or inputs, of a unit of utility or output. The specific formula therefore depends on the utility or production function chosen, but most commonly in recent years these have been assumed to be CES, often with a variable number of arguments as in the Dixit-Stiglitz function. The arguments of this function can be countable, but most often today they are taken to be in an uncountable set, over which both objective function and ideal price index are integrals. For example, using the notation of Bergstrand et al. (2019), let utility in situation i (year, country, etc.) be The term ideal price index has been used for objective functions ranging from Cobb-Douglas, through 2-good and n-good CES, to functions like this with additional arguments for other categories of goods. So unlike Index above, there is no single agreed-upon formula for this version of the ideal price index. Interestingly, this second version, despite its name, is not really an "index" at all in the usual sense. Indexes are needed when a simple average would not be meaningful, as when averaging across items with different units of measurement. Thus the initial Index above in necessarily a ratio, comparing prices across two situations. Neither numerators nor denominators within the expression have any meaning by themselves, but only in relation to their counterparts. In contrast, Pricei is defined for just the single situation i. If the objective function is a production function, then it is the minimum cost of a unit of output, which is well understood. But if it is a utility function, then it is the cost of a unit of utility, which has never been intended to have meaning by itself. Therefore, what is today routinely called an ideal price index only becomes an actual price index when used in a ratio, such as (Pricei / Pricej), comparing prices in two different situations. It should be noted, too, that even this ratio will only be meaningful if the utility or production functions from which Pricei and Pricej are derived are linearly homogeneous and therefore, for utility, homothetic. Now where did all this come from? For the older Index, that is fairly easy. It was Fisher (1922) who suggested and named it, though the formula itself had been suggested much earlier by Bowley (1899). Bowley called it (p. 641) "The best method theoretically for measuring 'aisance relative'." Aisance in French apparently means ease or affluence. For decades after Fisher named it, the square-root formula has been used and usually referred to as the "Fisher ideal price index." The first effort I have seen to try to do better than Fisher by deriving a measure of prices from an objective function was Samuelson and Swamy (1974). They continued to use the term ideal price index but only for Fisher's formula, not for their own. To improve on this, they defined by a price index and a quantity index from general objective functions, and showed them to be dual to one another. Samuelson and Swamy do not call their own indexes "ideal." Recognizing instead their dependence on scale or income, they say (p. 568)
Most often cited by those who use things like Pricei above are Sato (1976) and Vartia (1976), whose Sato-Vartia weights allow them to give appropriate weights to different prices. Both Sato and Vartia did call their indexes "ideal," but as "ideal log-change index numbers" and, in the case of Sato, an "ideal log-change price index." Neither spoke of an ideal price index without the "log-change" qualification. Vartia referenced a 1975 discussion paper by Diewert that also deals with "ideal log-change index numbers." Diewert (1978) later examined several alternative price indexes, including what he called the Vartia index, but he used the word "ideal" only for the Fisher index. And in later work he showed that the Fisher index would be what he called "exact," for a unit cost function that is quadratic. His "exact" seems to be what is now called "ideal," in that it can be derived from a specified objective function. Considering the role of the Pricei form of the ideal price index in measuring the importance of variety for welfare, one might have expected it to have been derived by Dixit and Stiglitz (1977). They did indeed derive it (for a sum of varieties, not an integral), and they called it a "price index," but they did not call it "ideal." It is only in 1985 that I find sources using the term ideal price index with the meaning of Pricei. Both Obstfeld (1985) and Jagannathan (1985) used the term and attributed the idea to Samuelson and Swamy (1974), even though neither those authors -- nor any since that I can find -- had used the term in print. From the published record, I cannot infer who among all these authors and others may have begun using the term in conversation. The term has certainly caught on in recent years, but interestingly it was not used in two of the most influential papers that used the concept itself. Feenstra (1994) and Broda and Weinstein (2006) -- both known for using it to quantify the benefits from increased variety due to international trade -- used the index but not its name. Feenstra (p. 158) spoke of an "exact price index for the CES unit-cost function." Broda and Weinstein followed Feenstra in calling it the "exact price index," and used ideal price index only for the Fisher formula. Well before Broda and Weinstein (2006), however, I find numerous uses of ideal price index to mean something like Pricei, and I find even a few before Feenstra (1994) such as Obstfeld (1985) and Jagannathan (1985) mentioned above. By now the term seems to have become far too standard for most authors to mention any source or sometimes even to explain it. As just one example, I went through the 37 appearances of ideal price index found by Google Scholar for the year 2003, and eleven of them were a variant of Pricei. I have not done the same for very recent years, as the term is now used more than 100 times each year, still often with the qualification "Fisher," but also often without and presumably something like Pricei.
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Immiserizing growth | |
The term "immiserizing growth" was used by Bhagwati (1958) and it seems unlikely that anyone used it before him, since he seems to have coined the word "immiserizing."
As for the concept, Bhagwati credited Johnson (1953, 1955) with identifying a form of immiserizing growth and also with working out the conditions for Bhagwati's form of it in an unpublished note. Long before both of them, Edgeworth (1894, p. 39-40) had shown, though only by example, that increased production of exports could so reduce their relative price that the country would lose or, as Edgeworth put it, be "damnified by the improvement." Perhaps he should have called it "damnifying growth." Edgeworth in turn credited Mill (1821) with noting the possible worsening of the terms of trade, although Mill apparently incorrectly equated this worsening with a necessary decline in welfare. (I have not read Mill and am taking Edgeworth's word for this.)
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Infant industry protection | |
Several sources cite Alexander Hamilton (1791) as the first to argue in favor of tariffs to protect infant industries, on the grounds that their costs are initially so high that they will only be able to compete if protected, and that they will then be able to reduce their costs sufficiently to prosper without assistance. Hamilton's purpose was indeed to argue both for the importance of manufactures and for the need to use policy to promote manufactures. However, in parts of this document he stated a clear preference for using "bounties" -- i.e., subsidies -- for this purpose: "...they are, in some cases particularly in the infancy of new enterprises, indispensable." (p. 280) Elsewhere, speaking specifically of encouraging production of iron, he favored a tariff: "The only further encouragement of manufactories of this article ... seems to be an increase of the duties on foreign rival commodities."
Some have also cited Say (1803) as an early advocate of infant industry protection. I have searched that document and do not find the basis for this. There is a discussion of reasons for using tariffs (mostly called "duties"), but none seems to capture the infant industry reasoning. Most cite List (1841), writing in German, as providing the first explicit case for infant industry protection, and this seems right. In Chapter 12 of the 1909 translation by Sampson S. Lloyd, he said:
It was Mill (1848) who made the case first in English:
The term "infant industry protection"
I find no further occurrences of the phrase infant industry until the period 1880-1885. Taussig (1883) made the case for what he only called "young industries," but I found four other authors, around the same time, referring positively or negatively to protection of "infant industries." Sumner (1985), for example, in his Chapter V on "Sundry Fallacies of Protectionism," listed his first as "That infant industries can be nourished up to independence and that they then become productive." The idea, together with the association with infant rather than young, new, or immature industries had become the standard term. Ely (1888), in a collection of articles originally written for the Baltimore Sun, devoted a chapter to "The Infant Industry Theory of Protectionism Further Considered."
The conditions for "infant industry protection"
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Intermestic | |
I could have simply said due to Manning (1977) in the glossary entry for this word, but I can't resist quoting the passage where the author coined the term:
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J-Curve | |
Magee (1973) seems to have been the first to do careful theoretical analysis of this phenomenon of the trade balance first worsening before it improves after a devaluation. But he was certainly not the first to use the term, as he cited a passage from the 1972 Wall Street Journal describing "what economists call a J-curve" in reference especially to the aftermath of the devaluation of the British pound in 1967.
A search through Google Scholar finds the term J-curve used frequently in other contexts, but the first use of the term applied to effects of a currency devaluation seems to have been at a 1971 conference (the proceedings of which I have not yet seen) and by Posner (1972). Both of these use the term as though it is already familiar, so I suspect that it had entered common use before this in the economic press.
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Kaldor-Hicks criterion | |
Kaldor (1939) was the first to state this criterion, but he was followed in the next issue of the same journal by Hicks (1939) who built on Kaldor and developed the idea more fully. One could easily, based on reading Kaldor and the fact that Hicks did not claim to have had the idea himself, conclude that this should be called simply the Kaldor criterion. Several authors in the next few years did attribute it solely to Kaldor. Most notable was Scitovszky (1941), who pointed out that the "principle enunciated in Mr. Kaldor's first-quoted article" (p. 77, footnote 1) could in certain cases justify both a policy change and its reversal.
It was Little (1949a, 1949b) who first called it the Kaldor-Hicks criterion. In 1949a, he credited Hicks with going beyond Kaldor by explicitly using it as a criterion for an increase in welfare, and then, throughout the last half of the paper, called it the Kaldor-Hicks criterion. Later the same year Little (1949b) addressed Scitovszky's criticism, and used that terminology throughout.
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Lerner diagram | |
The Lerner Diagram was first drawn by Lerner in an unpublished seminar paper (a "term paper" according to his teacher Lionel Robbins) in 1933. He used unit-value isoquants together with unit isocost lines to show the relationship between goods prices and factor prices in the H-O model. That paper was reproduced, "as it was originally written" according to the journal editor, as Lerner (1952). It appears that Findlay and Grubert (1959) were the first to make extensive use of the diagram, attributing it as "a diagram introduced by Mr. A. P. Lerner in his brilliant paper on factor price equalization in international trade." They did not happen to christen it the Lerner Diagram, however, and the first use of this (based on a Google Scholar search) was by Findlay (1971).
Some (including myself, until I learned better) have called it the Lerner-Pearce diagram, giving credit also to Pearce (1952). Bierwag (1964), in footnote 2, p. 57, said "This diagram is often called the Lerner-Pearce diagram..." citing Lerner (1952) and the Pearce's comment in the same issue of the the journal, and said "it has been widely used in international trade theory." That may be, but he cites only Findlay and Grubert (1959) plus the preface to the Japanese edition of Harry Johnson's International Trade and Economic Growth, which I have not attempted to find. In fact, although Pearce (1952) was debating Lerner regarding the likelihood of factor price equalization, he used unit isoquants, not unit-value isoquants, for the purpose. Since these do not align in equilibrium with a single unit isocost line, they cannot be used in the same way, and they do not achieve the essential simplicity of Lerner's construction. Pearce did use the diagram with unit-value isoquants in his comment on Lerner (1952), but there he wass clearly following Lerner.
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Level playing field | |
This term in a general context means subjecting all participants in an activity to the same rules. Exactly how that came to be seen as leveling a field is not at all clear. In sports, a tilted playing field may well advantage one team or the other, but by changing direction at half-time, that advantage can be made even.
In the context of economics, I find the level playing field mentioned first for banking, and for financial markets more generally, as these were deregulated around 1980. As regulations were relaxed for some financial institutions, other institutions sought similar relaxation for themselves. These concerns extended especially to international financial markets, where differences in national regulations put some countries' firms at a disadvantage. I find no use of the term level playing field in the context of international trade until 1982, when Bergsten and Cline (1982) cited Cline as noting that as comparative advantages become small due to growing similarity of factor endowments and technologies, differences in government policies and regulations become increasingly important in determining trade. They then say (p. 24):
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Marshall-Lerner condition | |
The condition was first stated in words by Marshall (1923) as characteristic of two offer curves that intersect in an unstable equilibrium, which he showed in his Fig. 20, p. 353 (appearing here as point E in Figs in the case Both Very Inelastic):
The next appearance of the condition was twenty years later still, in Lerner (1944). The context was very different from that of Marshall, as Lerner was not looking at the market for international exchange of goods. Rather, his purpose was to determine whether a mechanism for maintaining full employment through the gold standard would be stable. The mechanism would start with a fall in the price level due to the outflow of gold associated with a negative trade balance. To be successful, that fall in price level would need to reduce the trade deficit, thus increasing aggregate demand. But then he said, "There are other circumstances that render the automatic maintenance of full employment still more precarious." His reason was that the direct effect of a fall in prices is to decrease the value of a given quantity of exports, not increase it, and this then needs to be offset by sufficient increase in export quantity and/or decrease in import quantity in order to cause net exports to rise. For this to be true, he said,
A number of authors have chosen to name the condition after Robinson as well as Marshall and Lerner, presumably on the grounds that Robinson (1937) preceded Lerner in examining the same question of a devaluation and the balance of trade. Indeed, she did it more formally in a mathematical footnote that derived the change in the trade balance as
There is one other source that might have been expected to reach the result before Lerner (1944): Machlup (1939-40), who dealt in great detail with "The Theory of Foreign Exchanges." He applied supply-and-demand analysis to the exchange of currencies, and he noted that the supply curve for foreign exchange could be backward bending, changing some of market's comparative static implications. However, he did not mention that if both demands were sufficiently inelastic, then the equilibrium would be unstable. Therefore he did not find his way to the third familiar implication of the Marshall-Lerner condition: the stability of the market for foreign exchange. From all of this, the name Marshall-Lerner condition seems appropriate, since both of those authors stated the condition, independently and in different contexts, and no other author seems to have done so before them. Who gave it the name? Searching the literature around this time, I find Polak (1947) citing the condition, but only as "the well-known formula." Likewise Haberler (1949) presented the condition and included the following:
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Meade Index | |
Meade (1955a) did not put his calculation into the form of an index, except in an appendix, but rather suggested adding up the increases in trade and the decreases in trade separately, each weighted by tariffs, and concluding that there had been a gain from trade (in his context of formation of a customs union) if the former were larger than the latter.
In his example of the duty on Dutch and Belgian beer, Meade said (p. 66):
Meade's main point was that one should not look only at the product on which the tariff is being reduced, but rather at all changes in trade that will be caused, both positive and negative, by that change. Of course if tariffs on all other products were universally zero, then the contributions to his calculation for them would also be zero. Hence, this is a simple way of taking account of the second-best nature of a tariff reduction when tariffs on other products are not zero. In his Appendix II (pp. 120-121), Meade formalized his calculation and called it "an index of the change in world welfare," which he derived as dU = uΣi{dxi(pi−ci)} where U was world utility, u was the common marginal utility, dxi was the change in trade of good i, pi was price to consumers, and ci was price (i.e., cost) to producers. It seems to have been Vanek (1965, p. 15) who first called this the Meade Index.
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Mirror statistics | |
The technique of using one country's trade data to derive or check the trade data of a country with which it trades has probably been used as long as data on trade were being published and used. But the term for this, mirror statistics, is found first by Google Scholar in Brown, Marer, and Neuberger (1974), p. 300-301:
While the technique could be and probably is applied to data other than international trade, it is most frequently used for trade, and especially for trade with countries like the Soviet bloc and China where trade data, in the past, were unavailable or unreliable.
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Most Favored Nation | |
The term goes back more than two centuries. The earliest use I've found with Google Scholar was from 1784, but the idea entered into international commercial treaties long before.
The term itself can be misleading, since when applied to a country it may be interpreted as favoring that country over others. In fact, the meaning is rather to not treat the country worse than others. It may have been this tendency to misinterpret that led the United States to replace the term with permanent normal trading relations in 1998, during the lead-up to granting China permanent MFN treatment in 2000. Erler (1956) said that the practice of treating trade partners no worse than others goes back to the 15th century. Erler wrote in German, so I thank my friend Willi Kohler for providing the following:
For instance, a treaty signed on August 17, 1417, by Henry V of England and Duke Johann of Burgundy stipulates that English captains shall be allowed to land their ships in Flemish ports "in the same way as the French, the Dutch and the Scottish captains would do." Erler explicitly (though perhaps not too convincingly) calls this an instance of MFN. [Erler (1956, p 52)] A further instance was the London Trade Agreement (sic! Londoner Handelsvertrag), signed on July 22, 1486 by Henry VII of England and Duke Franz of Brittany. It stipulates that English merchants, when doing business in Brittany, shall enjoy the exact same liberties/freedoms as do merchants from any other state who maintain commercial relationships with Brittany. Further, they shall be treated with the same "caution and graciousness" as these other merchants. This pretty much seems like true MFN treatment. [Erler (1956, p 53)] A source that I found online but have been unable to learn the author of (it seems to be a chapter from a dissertation in India) says that the concept of MFN has been used since the middle ages. But its first use by more or less that name was in the Treaty of Utrecht, which was actually a group of several treaties ending the War of the Spanish Succession 1713-1715. One of those, the Treaty of Peace and Friendship, included the following passage:
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New new trade theory | |
This name, which is surely even more unfortunate than the "New Trade Theory," was introduced to the literature in 2004 by Richard Baldwin and co-authors. Baldwin and Forslid (2004) say the following (p.1):
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New trade theory | |
This unfortunate term -- unfortunate because it has continued to be used more than forty years after the group of theories that it refers to were introduced, which are therfore not at all new -- may not have been introduced by any one person. Initially, it was simply used to distinguish what were then some recent theories from the older theories of Ricardo and Heckscher-Ohlin-Samuelson. But as no more descriptive or person-specific name came into use, new trade theory became the standard by default. This was surely at least in part because the new trade theory encompassed multiple models by multiple authors, their common characteristic being only that they included one or more of three departures from traditional assumptions: increasing returns to scale, imperfect competition, and product differentiation.
As I search for use of the term new trade theory in Google Scholar, I find nothing at all before 1984. In that year there was only one source that uses these words, Borrus, Tyson, and Zysman (1984), and it wasn't obvious that they thought this was a name for the recent literature but only a convenient way of directing attention to it. Only in 1986 do I find the expression appearing again, and now it showed up in five publications in that year. None of the authors in that year spoke as if they were naming this recent literature themselves. But as Krugman (1986a) used it several times, I am inclined to give him credit for popularizing the term. One other author, and in a volume edited by Krugman, spoke of "the so-called 'new' trade theory," perhaps having heard Krugman and others speak of it. For many, including perhaps Krugman himself, the new trade theory is most closely associated with his writings, even though many others contributed importantly to it. One might have expected that "Krugman" would have taken his place alongside Ricardo and Heckscher-Ohlin in the name for a trade theory. But that did not happen, perhaps because Krugman himself led with the term new trade theory. There is of course a Krugman Model, but that is only one among many models, by Kruman and others, that are included the the new trade theory.
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Normal Trade Relations | |
This term was adopted in 1998 by the United States Congress to replace Most Favored Nation in certain US statutes. The legislation was signed by President Clinton July 22, 1998, shortly before the debate on MFN China renewal. As it was explained in Senate Report 105-82, "Clarifying the Designation of Normal Trading Relations," September 15, 1997,
Wikipedia once explained the change as follows, but gave no source (and it no longer appears):
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Odious debt | |
The first use of this term seems to have been by Sack (1927), although as that book is in French, I cannot directly confirm that the term appeared there or that it appeared without reference to an earlier source. My basis for being fairly confident that this was the first use of the term with this meaning -- of debt that may be legitimately not paid back by a successor government -- is a footnote much later in Sack (1947) where he referenced that earlier work:
This does not mean that the concept in international law was new at that time. Cahn (1950) included a footnote covering almost a full page citing dozens of sources on the topic, only the last and most recent of which was Sack (1927).
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Offer curve | |
The offer curve, without the name, was first developed by Alfred Marshall. It was first published in an Appendix attached to Book III, Chapter VIII, of Marshall (1923), but as he explained in an opening footnote,
He did not however name it. He referred to his curves throughout only as OE and OG, for England and Germany respectively. Only once did he even use the world "offer" in connection with these curves, saying "E will be prepared to offer only OM′′ of her bales in return for P′′M′′ bales from G." The best candidate I find for having named the offer curve is Edgeworth (1894). This article was published in three parts, in the second of which, Edgeworth (1894) Part II he showed the curves in various configurations and used the verb "offer" to explain what they represented. Then in the third part, Edgeworth (1894) Part III, discussing a similar diagram of Auspitz and Lieben (1989), he said "Accordingly their supply- or offer- curve is never inelastic in our sense of the term...." That, to me, qualifies Edgeworth as having introduced the term. Several subsequent authors also used the term, perhaps following Edgeworth or perhaps coming to it on their own. Some used it not to represent international trade, but rather for the supplies and demands of individual consumers. Bowley (1924) however was quite explicit, both in using the diagram which he said had been used "by many writers in the fundamental treatment of foreign trade" (p. 5), and in calling it the offer curve (p. 7). He cited Edgeworth's Mathematical Psychics from 1881 for the concept and mathematics of the equilibrium, but apparently not for the offer curve. The only other author who deserves mention here, however, is Lerner (1936). In this classic article on the symmetry between import and export taxes, his argument was built entirely on offer curves. In his opening sentence (p. 306) he stated as one of his purposes that he "demonstrates the applicability of Marshall's 'offer curve' apparatus to the elucidation of this problem." His use seemed to assume that readers were already familiar with both the diagram and the name for it, although his use of the quotation marks around it suggests that he didn't see the name as already universally adopted. But the use of the term in this still widely cited paper has surely secured its place in the lexicon of economics.
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Ohlin definition | |
Relative factor abundance and scarcity can be defined either in terms of the relative quantities of factors -- the quantity definition -- or in terms of the relative prices of factors -- the price definition. In most renderings of the Heckscher-Ohlin Model, factor quantities are fixed but factor prices vary with trade, so if the price definition is used, it must be based on factor prices in autarky. The price definition is often attributed to Ohlin (1933) and thus is called the Ohlin definition. The quantity definition is less often given a name, although Bhagwati (1959) called it the Leontief definition, after Leontief1954.
Before Bhagwati (1959), however, Jones (1956) was the first to discuss these definitions extensively, and he repeatedly called the price version either "Ohlin's definition" or the "Ohlin definition." Therefore I attribute this term to Jones. Others, however, have not always called it the Ohlin definition, instead calling it the "Heckscher-Ohlin definition." In fact Jones himself, in his 1956 dissertation which included much of his 1956 article, in two places also called it the Heckscher-Ohlin definition. As for the quantity definition, Jones gave it no name, once simply calling it "mine." My search in Google Scholar found only eleven occurrences of "Ohlin definition," with or without "'s" or "Heckscher-", after Bhagwati (1959). Just four of these had "Heckscher-" preceding it. Of the remaining seven, the first three said "Ohlin's," while the last four said "Ohlin." Since 1975, the only term used has been "Ohlin definition," and these were by Helpman and Razin (1978), Maskus (1981), and Chipman (2006). It does appear that, while the terms no longer appear often in any form, "Ohlin definition" has become standard. This is not really fair to Heckscher, however, since it is clear that Ohlin adopted the price definition from his teacher, Heckscher. Heckscher (1919) included the following passage, which nicely summarized both the price definition and the Heckscher-Ohlin Theorem itself:
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Optimal tariff | |
The terms optimal tariff and optimum tariff carry with them the implication that a positive tariff can be beneficial for a country from an overall economic welfare perspective. That is most often what their use today is meant to mean, rather than referring to the particular size of tariff that will achieve that optimum.
It was long recognized that a tariff, by improving the terms of trade, would provide a benefit that might possibly offset the loss that a tariff also causes by distorting markets. But Bickerdike (1906) was the first to show that this was not only possible but necessary, if there is any terms-of-trade effect at all and if the tariff is not too large. I've seen some also credit Edgeworth for this, as he addressed this topic in Edgeworth (1894). But as I read that, the result, if present, is hard to discern. And Bickerdike himself says that he is using the offer-curve and indifference-curve tools from Edgeworth (1894) to derive his own result, which he, and presumably his editor, regarded as new.
That there might exist an optimal (or optimum) level of such a tariff, once any benefit is known, follows immediately, since too large a tariff, such as a prohibitive one, must be harmful. But Kahn (1947) was the first to quantify what that optimal tariff might be. He expressed it in terms of elasticities of foreign supply of imports, η, and foreign demand for exports, ε:
In the same place, Johnson himself derived the following different, simpler, and equivalent formulae for "the optimum welfare tariff"":
If foreign demand is inelastic, as is quite possible and appears as a backward-bending foreign offer curve, foreign supply elasticity is negative and these formulae suggest a negative tariff. That is misleading, however, as the optimum would instead be a tariff large enough to move along the foreign offer curve to where demand is instead elastic. The message here is therefore not that one can determine the optimal tariff simply by measuring the foreign trade elasticity if that were possible, since that elasticity will likely change when the tariff is levied. The formulae only allow one to know, once a tariff is in place, whether it is optimal. Turning now to the origins of the terms optimal tariff and optimum tariff themselves, the first to come close to saying either was Kaldor (1940, p. 379) who spoke of the "optimal rate of import duty." He identified it in his diagram as that which achieves an offer-curve equilibrium at the tangency between the foreign offer curve and a trade indifference curve (without that name), but he did not attempt to quantify it.
It was Scitovszky (1942) who first used the term optimum tariff, as did both Kahn (1947) and Johnson (1951,1953/54) for their quantifications of it in terms of elasticities. Only in 1956 was Fleming (1956) the first use optimal tariff in print, in his title "The Optimal Tariff from an International Standpoint." It caught on, being used by many authors after that, although optimum tariff also continued to be used by many. Google's Ngram plot of the two terms shows that optimum tariff dominated optimal tariff until 1985, after which optimal tariff took the lead, and then use of both soon declined.
![]() My own view is that optimal tariff should be preferred, as "optimal" is clearly an adjective, while "optimum" is primarily a noun. |
Pauper labor argument | |
The first use I've found of the phrase pauper labor argument was by Lieber (1869). (I also searched with the British spelling, "labour," but found little relevant to this argument for tariffs, even later.) Lieber also gave one of the best statements the argument itself. After dismissing a case for protecting capital instead of labor, he said:
My search in Google Scholar for pauper labor argument finds nothing before this, and also nothing later after it until 1880, when it appeared as a section heading in McAdam (1880). Then, a few years later, Wells (1885) had a chapter titled "The 'Foreign Competitive Pauper-Labor' Argument for Protection," and he used the phrase three more times in his discussion. Neither McAdam nor Wells cited any source for the phrase, so I do not know whether either may have gotten it from Lieber. But in any case, the phrase then passed into common usage, probably due to Wells. His book of essays had a second edition two years later, and it is still available from Amazon, which says "This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it." The argument itself, as opposed to the phrase identifying it, seems to have originated in the United States. Two sources cited American politician Henry Clay as making the argument as part of the case for his American System. I've done my best to search the writings of Clay himself, but I have been unable to find any mention by him of pauper labor. One source, however, quoted Clay as fearing that "our money would be thus drawn from us to support the pauper labor of Europe." Another credited Clay with wanting the United States to be "independent of the pauper labor of other nations." And Clay was the leader of the Whig party at the time, which published a policy agenda on July 25, 1844, that included the following: Source
I would note that what is distinctive about this argument is the use of the word "pauper." Presumably it was not unusual to expect that trade between two countries with different levels of wages might reduce the higher of the two. This, of course, is exactly what we now expect from the much later Stolper-Samuelson Theorem of the Heckscher-Ohlin model. But the emphasis in the pauper labor argument is not just that a high wage will fall, but that it will fall to such a level for laborers to become paupers. One Webster's definition of "pauper" is "a person destitute of means except such as are derived from charity," which is inconsistent with a pauper earning a wage as a laborer. But a second definition is simply "a very poor person." It may well be this ambiguity that made the use of the word "pauper" attractive, since it associated low-wage workers with beggars. Exactly why Clay and other advocates of the pauper labor argument thought that wages in Europe were that low, I do not know. But one source, Burke (1846) p. 23, took pains to argue against that:
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Peso problem | |
The term is often attributed to Milton Friedman, who apparently commented on the market for the Mexican peso in the early 1970s and explained Mexico's high (relative to the US) interest rate by the concern that the peso would be devalued, which it later was. It is not clear that Friedman actually used the term peso problem, however. Paul Krugman, in his blog on July 15, 2008, said that the term was coined in the "MIT grad student lunchroom," perhaps by him or perhaps by Bill Krasker, who he said "published the first paper using the term" in Krasker (1980).
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Policy space | |
Although the term or a variant began to be used in UNCTAD discussions and documents in the early 2000s, it was defined explicitly in the São Paulo Consensus of UNCTAD (2004, p. 2): "...the space for national economic policy, i.e., the scope for domestic policies, especially in the areas of trade, investment and industrial development, is now often framed by international disciplines, commitments and global market considerations."
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Precautionary Principle | |
This expression has appeared a few times in the past, not as the name of a principle but simply as a descriptive adjective, as in "we advocate for the use of vaccines following the precautionary principle that risk of illness should be avoided." As a more agreed-upon principle several sources say that it originated in Germany, under the name Vorsorgeprinzip, used especially in environmental contexts as meaning to take action in advance so as to prevent harm, rather than wait to fix the harm after it has been done. This was said by Weidner (1986) to be included in the 1971 Environmental Programme of West Germany as follows:
As the term has been used more recently, however, it includes not just taking or blocking action to prevent harm, but specifically doing so even when the science has not conclusively demonstrated the need to do so. The Precautionary Principle in this modern sense seems to have appeared first in the 1987 North Sea Conference. Its Second North Sea Ministerial Declaration includes the following under paragraph VII:
The term came into wider use in the 1992 meeting of the United Nations Conference on Environment and Development. The Rio Declaration from that conference, Agenda 21 (1992), again spoke repeatedly of a "precautionary approach." Paragraph 35.3 states the following:
The two terms Precautionary Principle and Precautionary Approach have both been in common use since the late 1980's. Google NGram reports the first of these terms appearing more than four times as often as the second when they peaked in the early 2000's. So it seems that Precautionary Principle is now the more standard term. ![]()
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Price-specie flow mechanism | |
The mechanism -- by which a balance of payments surplus or deficit causes an inflow or outflow of money (specie) and a resulting rise or fall of prices that eliminates the imbalance -- was first laid out most clearly by Hume (1777). He made his point by imagining first cutting the stock of money substantially and arguing how this will change wages and prices so as to induce flows to restore balance, which he followed with a similar story for an initial increase in the stock of money (p. 311):
Although Hume is today routinely credited with this idea, several other authors anticipated it, if not as clearly. Viner (1937, p. 74) credited Cantillon (1730) where "the self-regulating mechanism is clearly and ably expounded." I have tried to follow Cantillon's exposition, and I am not sure that I would have understood the mechanism from that. The mechanism has often been called just the specie flow mechanism, though that de-emphasizes the role of prices, the role of which was not always recognized by other authors. The term price-specie flow mechanism entered the literature with Angell (1926), who dealt with it in detail.
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Purchasing power parity | |
It was Cassel (1918, p. 413) who introduced the term in the context of discussing how exchange rates should be reset after World War I and the large differences in inflation that occurred in different countries, especially Sweden and England.
At every moment the real patity between two countries is represented by this quotient between the purchasing power of the money in the one country and the other. I propose to call this parity "the purchasing power parity." [Italics in original.]
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Rent seeking | |
Rent seeking was introduced to the trade literature by Krueger (1974), who defined it generally but applied it to quantitative restrictions on trade. She noted (p. 291) that government restrictions on economic activity "give rise to rents ..., and people often compete for the rents." She called this competition rent seeking, a term that she apparently coined and that has caught on hugely.
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Resource curse | |
The source for this was Auty (1993), which had the phrase it its title, Sustaining Development in Mineral Economies: The Resource Curse Thesis. I have not yet been able to access the book itself, but I found found no other use of the phrase prior to 1992, and in 1992 one source used it in quotation marks, as though it was from somewhere else. Auty himself cited his book in a 1993 paper as being from 1992, so it must have existed a while before that and already become familiar to others.
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Second-best argument for protection | |
The introduction of the term second best in the context of protection was by Meade (1955b), who included four chapters on "The Second-Best Argument for Trade Control" with subheadings "The raising of revenue," "The Partial Freeing of Trade," "Domestic Divergences," and "Dumping as a complex case."
The classic paper establishing that trade policy is only second best in general for dealing with domestic distortions was Bhagwati and Ramaswami (1963), who did not cite Meade. However, they also did not use the term second best, and the point of their contribution was to argue for policies superior to trade policies. The term second best was adopted by Lipsey and Lancaster (1956), attributing it to Meade, but their application to tariffs was concerned only with the optimal level of one tariff when another is non-zero. By 1969, in Bhagwati et al. (1969), Bhagwati too was using the second best terminology, but again his and his co-authors' main point was that tariffs are not even second best but only at most third best when other policies can be adjusted. Thus trade economists have generally used the second-best argument against protection rather than for protection. If policies superior to tariffs are not available, however, the argument may become one in favor of protection. Thus in its simplest form, a government that is unable to levy any other kind of tax but requires revenue in order to function will use tariffs no matter how far down the list from first-best tariffs may lie. This has presumably been understood since long before the distorting effects of tariffs were examined by economists. And even here, the argument should have been subject to the caveat that the benefits from the government activity must outweigh the welfare losses due to the tariff. This is equally true in more complex cases. The infant industry argument depends on distortions that prevent infant industries from reaping the full benefits of their production. The first-best policy is to correct or offset that distortion, perhaps by a production subsidy. But if production subsidies are unavailable (not just rejected politically, since that should in principle apply even more to a tariff, if it were fully understood), then a second-best tariff will be beneficial if not too large.
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Seigniorage | |
The origin of this term is mentioned by Eichengreen (2011, p. 6):
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Social dumping | |
This term is a good deal older than I had supposed, appearing with very much the current meaning as early as 1928, and perhaps earlier.
The earliest use I find of the term itself is in Krüger (1926):
That ambiguity does not apply, however, to the use I find of the term in 1928. A bibliography of "Recent Labour Legislation" in International Labour Review 19(4), April 1929, pp. 575-619 lists a book in German, Baer (1928) with the title Das soziale Dumping and a summary that begins:
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Splinternet | |
The Economist (Nov 22, 2016) said the word and concept were not new, as a whole book had been written about it. That seems to have been Malcomson (2016). However, the term became common in online discussions well before that. The first use of the word that I can find was by Tehrani (2008), but referring to the fragmentation of the World Wide Web by companies, not by countries or governments. Facebook, as the most familiar example, had become a sort of web-within-the-web, where websites would appear that were not reachable without entering Facebook itself. Later the same year, Searls (2008) used the term in the title of a blog post dealing with the role of national boundaries, although here the concern was with companies such as Apple that treated users differently from different countries, presumably in their effort to conform with national laws. Neither source mentioned the efforts by governments such as China to wall off their portion of the internet in the way that Malcomson (2016) was most concerned with. The word splinternet came to be used in a great many sources online during 2010 and after, and I have not tried to find where the deliberate splintering by government was first included in the term.
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Stylized fact | |
The source if this expression would appear to be very simple, as I found numerous authors who cited Kaldor (1957) as introducing it. In a review of a volume that contains a reprint of his essay, Lipsey (1962) complemented Kaldor for basing his theorizing on "a series of 'stylised facts,' a device which prevents Mr. Kaldor's theorising from departing, as growth theories so often do ... for a world that is not our own." Kaldor instead intended to explain "what is currently believed to be the state of the world." This expression might well serve as well as any to define what might be meant by stylised facts.
However, the expression stylised facts did not appear in Kaldor's article, nor in its reprint. Instead, Kaldor said on page 591
How, then, did it come about that so many have attributed the phrase stylised facts to Kaldor (1957)? I suspect that he probably did use the term in his early draft and in his presentations of his work to colleagues, who may then never have felt the need to read the published version. And I would go on to suggest that its removal from the published version may have been at the insistance of the editor, who felt that the work should be based on true facts, not stylized ones, and may have pushed Kaldor to include their sources. However, I do find Kaldor using the term explicitly in Kaldor (1961) where he seemed to be introducing the term himself for the first time in a passage that nicely explained why he found it useful:
This is an excellent justification not just of the term but also for using information that does not quite qualify to be called "facts." Indeed, economic data when Kaldor was writing were much scarcer and probably less accurate than they are today, but they were no less useful for motivating understanding of the world. Sadly (in my view), the term stylised facts has become widely used, and it is often applied in situations where the facts are just facts.
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Tariffication | |
This word, which I had supposed was created to describe the conversion of quotas and other NTBs into equivalent tariffs, turns out to have been in use long before for a different purpose. The prices charged on a wide variety of products and services are called "tariffs," and the setting of those prices seems routinely to have been called tariffication.
I find the first use of a form of the word in the context of international trade policy in Wijkman (1986) who, however, wrote it as "re-tariffication" (p. 47):
The earliest appearance that I find is in Zietz (1988) who advocated its use in negotiations on trade barriers in agriculture. Whether others were already using the term at that time, I don't know, and it is certainly true that others were advocating the substance of tariffication, though without using the word. Wolf (1985), as an early example, was advocating the replacement of quotas by tariffs as a means of "unraveling" the Multi-Fibre Arrangement. The term came very much into its own in 1989, when the United States tabled a proposal to use tariffication in the Uruguay Round negotiations on agriculture. I have not been able to access the US document itself to see whether it used the term, but around the same time, in writings by others about the US action, the term was certainly used, if not with approval. Economist (1989) called it a "monstrous word":
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Technology gap model | |
Those who write about technology gap models routinely cite Posner (1961) as the first of several papers with this idea. That was true for the idea, but not the term. Posner's paper included neither the word technology nor the word gap. It was Hufbauer (1966) who elaborated Posner's idea and spoke of a "technological gap account" of trade. Krugman (1986b) may have been the first to formalize the model to modern standards, and he certainly used the words technology gap in his title. One source cited the same Krugman (1986) paper but listed it as presented at the "Conference of the International Economic Association, Sweden, 1982," suggesting that the switch from technological to technology may have originated by 1982 with Krugman. I have found no earlier use of the term technology gap.
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Terms of trade | |||||||||||||||||||||||||||||||
The phrase terms of trade was first used with more or less its modern meaning by Marshall (1923), p. 161. In an example involving countries E and G, he spoke of "the amounts to which E and G would be severally willing to trade at various 'terms of trade'; or, to use a phrase which is more appropriate in some connections, at various 'rates of exchange.'" He then explained his preference for the new term on the grounds that "rates of exchange" could be understood to connote monetary exchange rates, while he meant the rate at which goods are traded for other goods.
Having introduced the expression in the book, Marshall then used it in subsequent discussions, but he did not use it exclusively. He seemed to alternate between "terms of trade" and "rate of interchange," two expressions that seemed to be synonyms as he used them. There is slight uncertainty as to whether this was Marshall's first use of the expression. This is because it also appeared in Appendix J of the same book, which a footnote explained was largely written much earlier, between 1869 and 1873, and which was "privately printed and circulated among economists at home and abroad in 1879." (p. 330). However, Appendix J with only very few exceptions does not use terms of trade, but rather alternates between "rate of interchange" and "exchange index." It seems likely that the few (I only found two) occurrences of terms of trade in that appendix were added when it was presumably revised for its 1923 publication. This is supported by the fact that terms of trade does not appear at all in the 1920 8th edition of Marshall's (1890) Principles. Was Marshall the first to use the term? Taussig (1927) said so, citing Marshall (1923). And I have confirmed that Mill (1848) did not use the term. That of course leaves open a great many others who might have. But from the way Marshall introduced the term, it appears that he, at least, thought it was new.
Variations on the Terms of Trade
Taussig (1927), after explaining Marshall's preference for "terms of trade" over "rate of exchange," went on "to reduce still further the possibilities of misunderstanding" by refining the expression as barter terms of trade, emphasizing that it referred to the rate at which goods are exchanged for other goods. Taussig also distinguished net and gross barter terms of trade, the latter allowing for total amounts paid even when they differ from prices due to trade imbalances that might arise from, say, reparation payments.
Viner(1937) argued that the classical economists were concerned not just with the rates at which goods exchanged for one another, but also with the rates at which factors exchange, through their production of goods and trade. He therefore introduced the factoral terms of trade, both single and double.
Finally, Dorrance (1948) suggested income terms of trade as an alternative to all the others, which he argued gave a misleading indication of the extent to which a country was gaining from trade when markets were in disequilibrium, as he said had become more common in the mid-20th century. A rise in a country's barter terms of trade, due to a rise in its prices relative to the price of imports, could be harmful if it mainly caused a fall in the quantity it was able to sell. The income terms of trade, because it related the value of exports -- price times quantity -- to the price of imports, would correctly record a decline if the price increase was more than offset by a quantity decrease.
To summarize, let pX, X, AX be the price, quantity, and productivity of factors producing exports respectively and pM, M, AM be the same for imports. We then have:
Up or Down
As defined above, a rise in the terms of trade is an "improvement," in the sense that the country is getting more in return for what it exports. That has been the convention followed by most authors, who have defined it as pX/pM, but not all. Some have defined it as pM/pX, in which case a decline in the terms of trade is an improvement.
Marshall himself treated the terms of trade as a property of the transaction, not of either country, and thus his terms of trade was just the relative price of two goods, the identities of which were arbitrary. Also, a great many of those who have used the concept of the terms of trade have not needed to define it quantitatively, since they could speak simply of the terms of trade improving or deteriorating. But others have needed to incorporate the terms of trade into an economic model or report it as empirical data, and for either purpose it was necessary to choose either pX/pM or pM/pX.
The first to do this was Taussig (1927), who spoke of and reported data for the terms of trade of Great Britain, Canada, and the United States. For each he chose to define it as pM/pX, with the result that when his curves declined, that was beneficial for the country. Viner (1937) made the opposite choice, remarking in a footnote (p. 558) that
However, the opposite choice has often been made by economists studying international monetary, macroeconomic, and financial issues. This seems to have started with Obstfeld (1980, p. 463) who had "... the terms of trade, defined as the price of foreign consumption goods in terms of home goods." This was not his choice when writing with Rogoff in the definitive textbook of the field, Obstfeld and Rogoff (1996), who on p. 25 said "In general a country's terms of trade are defined as the price of its exports in terms of its imports." But the same two authors, writing later, reverted to pM/pX, as have many (but not all) authors in that subfield writing since.
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Thank-you note | |
As a policy to respond to a foreign subsidy. I attribute this to Paul Krugman fairly early in his career. I have, however, been unable to track down where he actually said it. I once asked him directly, but he couldn't recall.
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Third World | |
Explained in The Economist, "Seeing the World Differently," June 10, 2010.
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Trade deflection | |
Shibata (1967, p. 151) defines this as a "redirection of imports from third countries through the partner country with the lowest tariff, with the sole aim of realizing tax advantage by exploiting the rate differentials between the member countries within an economic union." He notes that trade deflection had previously been defined in the Stockholm Convention, which established the European Free Trade Association, but somewhat more narrowly and differently as arising from difference in tariffs on raw materials or intermediate inputs that allows a final good to be exported from one member to another of an FTA.
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Transnational corporation | |
My Glossary entry for transnational corporation has two definitions. The second says, "A corporation whose national identity is a matter of convenience only, and that will move its headquarters readily in response to incentives." I wrote that before I was documenting my sources, and I now have no idea where I got it. By googling this expression now, I only find my own Glossary, plus one other source that clearly copied it from me without attribution. (I've always been very careful never to duplicate text that I've found elsewhere without putting it in quotation marks, and that is almost always from a source to which I've included a hyperlink.)
I will concentrate here, therefore, on my first definition, "Same as multinational corporation, though for some reason this term seems to be preferred by those who don't like them." As for the first half of this, my search now for definitions mostly finds the two terms transnational corporation (TNC) and multinational corporation (MNC) to be alternatives for the same thing: a corporation that operates in more than one country. A few authors do make a distinction between TNC and MNC, but on my reading they do not agree on what that distinction is. Oxford Reference, for example "contrasts" TNC with MNC, saying that while the former is controlled from a home country and has operations in many, the latter has multiple aspects, including control, that "span national boundaries." Another source says in one definition that a TNC has "global scope but no central headquarters," while still another seems to say the opposite: that MNCs have facilities in multiple countries and that "each operates as its own entity rather than forming the integrated network characteristic of transnational companies." Source Robinson (1967, p. 154) may have been the first to carefully delineate the various forms of corporation in the international context, identifying fully six different "types": A=Domestic; B=Foreign oriented; C=International; and D=Multinational; E=Transnational; and F= Supranational. He distinguished MNCs and TNCs by a difference in "attitude":
The first use I can find of the term transnational corporation was Carlston (1956). In a discussion of the role of international trade in "world society," he said (p. 93) "The transactions of international trade involve the meshing of a vast number of organisations, many of them of great size." He goes on to say (p. 94):
I think it is fair to say that most of these early references to TNCs in the legal literature were not particularly critical of them. The one exception I came across was de Passalacqua (1968), a dissertation on international law that included only one mention of transnational corporations but noting a negative aspect of them (p. 155):
I have not figured out a way to learn whether particular uses of the term transnational corporation include negative, positive, or neutral connotations without reading them in context, and I did that only through 1973, for which Google Scholar found 20 sources using the term. Of these, six had negative orientations. The numbers of sources mentioning it per year grew quickly, to 133 in 1980, 168 in 1990, 515 in 2000, and 1,130 in 2010. I have no easy way to learn what fraction of these used TNC with a negative connotation, nor to compare this with the uses of other terms such as MNC. My own statement, included in my Glossary definition, that TNC is preferred by those who view them negatively is still, therefore, just my own very subjective impression. I like to conclude these notes on origins of terms with my judgement of who should get credit for introducing them. In this case, I cannot. The term may first have appeared in the legal literature with Carlston (1956), but as "transnational" was already a familiar and appropriate adjective in use, I have no reason to think that others were following him. I conclude that no particular person should be credited with the use of "transnational corporation," positive, negative, or neutral. I would, as always, welcome views and information from others on this.
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Variable geometry | |
This term is a bit hard to track, as it seems to have many uses outside of economics, particularly within the engineering and design of machines. In order to limit a search to use of the term within the European Union, I have searched for "variable geometry Europe." Google Scholar fails to find this before 1982, when it appeared in three sources. In all three, the term was used along with several others for the same idea, suggesting that none of them were new. For example, Emerson (1982) said
Exactly why one would speak of a "geometry," I don't know, but most likely it was prompted by the different shapes that maps of included countries would take if different countries participated in different agreements.
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Vent for surplus | |
The "vent for surplus" theory of trade was developed especially by Myint (1958), who attributed the term to Williams (1929) who had taken it from Mill (1848). Myint attributed the idea to Smith (1776).
The basis for giving Smith (1776) credit (or blame) for the idea is the following passage, p. 240-1:
Mill (1848, p. 579) was critical of this idea, which he viewed as a mercantilist mis-conception:
Both the terminology and the criticism also appear in Mill (1874), in a discussion of Ricardo's treatment of trade, which Mill preferred:
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