1994 Reports

Intraindustry Trade and Theory

Bhagwati, Jagdish N.; Davis, Donald R.

In a recent issue of the Journal of Economic Perspectives, two Stanford
graduate students, Joshua Gans and George Shepherd (1993), write about the
difficulties that eminent economists had in getting their ideas published in the
mainstream professional journals. They focus on papers containing unfamiliar ideas
that have yet no resonance for the profession trapped in "conventional wisdom". But
they ignore the difficulty that sometimes attends publishing papers that challenge an
orthodoxy that is newly established, no matter how penetrating and persuasive the
critique is, simply because the challenge is seen as emanating from the "old and
obsolete school".
This latter has been the fate of John Chipman's important work on
intra-industry trade which refuted the new orthodoxy among the younger trade
theorists working with models of imperfect competition, that perfectly competitive
models could not generate intra-industry trade. Rejected by referees on grounds that
Chipman's results were "uninteresting" or "wrong" or "obvious" or attacking "straw
men," and published in consequence in volumes and exotic journals, this work
remains a major contribution. This festschrift provides an appropriate place and
occasion to resurrect that work, put it into context, and to reshape and extend it
analytically.