14 October 1977
THIS YEAR’s ECONOMICS PRIZE AWARDED TO BERTIL OHLIN AND JAMES MEADE
The Royal Swedish Academy of Sciences has decided that the 1977 Prize in Economic Sciences in Memory of Alfred Nobel shall be shared equally by
Professor Bertil Ohlin, Stockholm, Sweden,
Professor James Meade, Cambridge, UK,
for their pathbreaking contributions to the theory of international trade and international capital movements.
Bertil Ohlin’s classic work, Interregional and International Trade, has brought him recognition as founder of the modern theory of international trade. He has developed a theory that demonstrates which factors determine the pattern of foreign trade and the international division of labour on the one hand, and on the other, shows what effect foreign trade has on the allocation of resources, price relations and the distribution of income. Ohlin has also demonstrated similarities and differences between interregional (intra-national) and international trade, and the connection between international trade and the location of industries.
James Meade, mainly in his major work, The Theory of International Economic Policy, has demonstrated the effects of economic policy on foreign trade and penetrated the problems of stabilization policies in “open” economies. “Open” economies are then defined as those which are greatly dependent on foreign trade. His analysis has particularly concentrated on the conditions necessary for internal and external balance, i. e., balance both in the domestic economy, and in foreign transactions. He has also shown why and how a successful stabilization policy must take into account not only the level of total demand for goods and services, but also relations between prices and costs. These achievements have made Meade the leading pioneer in the field of international macro-theory and international economic policy.
Both Ohlin’s and Meade’s works attracted a great deal of attention immediately after publication – 1933 and 1951/55, respectively. They have also been points of departure for extensive empirical research on international trade, on international movements of capital, and on stabilization problems in open economies.
The breadth and importance of Ohlin’s and Meade’s contributions have, however, not become obvious until the sixties and seventies, in conjunction with the growing internationalization of the economic system. It has become increasingly clear that problems related to the allocation of resources, business cycles, and the distribution of income are very much international problems. This means that foreign trade, international price fluctuations, the international allocation of economic activities and the transfer of resources, as well as the international payments system have become dominant factors in economic analysis and economic policy.
This year’s Nobel Prize – Skr. 700.000 – will be shared equally by Ohlin and Meade.