An Austrian critique of the Prebisch-singer theory of the deterioration in the terms of trade

Abstract

Purpose

This study aims to offer a critique of the theory of the deterioration in terms of trade, developed by Raúl Prebisch and Hans Singer.

Design/methodology/approach

As an example of the theory’s shortcomings, the case of Argentina’s import substitution model is analyzed.

Findings

This study demonstrates how a misunderstanding of the influence of price variability in international trade may lead to the mistaken conclusion that protectionist measures must be enforced to achieve growth and prosperity.

Originality/value

This is the first study that criticizes the Prebisch-Singer theory of the deterioration in the terms of trade from an Austrian economics.

Citation

Futerman, A.G. and Block, W.E. (2020), "An Austrian critique of the Prebisch-singer theory of the deterioration in the terms of trade", Journal of Financial Economic Policy, Vol. 12 No. 4, pp. 721-735. https://doi.org/10.1108/JFEP-09-2019-0181