History of Political Economy
Adam Smith’s “Two Distinct
Beneits” from Trade:
The Dead End of “Vent-forSurplus” Interpretations
Reinhard Schumacher
In the last few decades, Adam Smith’s theory of international trade has
seen a revival, after having been neglected for a long time. This renaissance can arguably be attributed to Hla Myint (1958), who highlights the
advantages of a Smithian trade theory compared to the static theory of
comparative advantage. Myint distinguishes between two different gains
from foreign trade in Smith’s theory, a vent-for-surplus and a productivity
gain. From those beneits, he derives two separate theories of international trade, namely, a vent-for-surplus theory and a productivity theory, which he ascribes to Smith. This categorization has been successful if measured by its adoption by other scholars. However, there have
been arguments about the interrelation of both theories, whether they are
inseparable, distinct, or mutually exclusive. Additionally, the vent-forsurplus gain has caused some debates about its possible interpretation
and Smith’s original application.
In this article, I do not want to add to either of these two discussions.
Rather, I will disprove Myint’s widely adopted categorization. This categorization cannot be sustained when compared to what Smith actually
writes. It is rather based on a misreading of one paragraph of The Wealth
Correspondence may be addressed to Reinhard Schumacher, Department for Economic and
Social Sciences, Universität Potsdam, August-Bebel-Straße 89, 14482 Potsdam, Germany;
e-mail: rschumac@uni-potsdam.de. I would like to thank Jeffrey Young, Kevin D. Hoover, Paul
Dudenhefer, and two anonymous referees of this journal for their very helpful comments.
History of Political Economy 47:4 DOI 10.1215/00182702-3321324
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of Nations (WN). For Smith, imports and exports constitute the “two distinct beneits” from foreign trade, which he expounds in The Wealth of
Nations. Smith does not distinguish between a vent-for-surplus gain and a
productivity gain from foreign trade and he has no vent-for-surplus theory
in a modern sense.
The article is organized as follows. I will irst show how Myint comes
to the conclusion that Smith’s theory of international trade contains a ventfor-surplus and a productivity theory and how this separation has been
discussed in the literature. Afterward I will compare this categorization to
The Wealth of Nations. I will discuss the meaning of the terms “surplus
produce” and “superluities” in both The Wealth of Nations and the contemporary literature. I will show why imports and exports are both beneicial according to Smith. Moreover, the reasons why Myint and others have
misinterpreted Smith’s gains from trade will be discussed. Afterward, I
will examine why other classical economists, above all David Ricardo
and John Stuart Mill, criticized Smith. Their criticism is not directed
against a modern vent-for-surplus argument and has been misunderstood
as well. The article ends with a short conclusion.
1. Smith’s Two Alleged Theories
of International Trade
In an inluential article, Hla Myint (1958) argues that Adam Smith uses
two separate gains to show that foreign trade is beneicial for a nation.
Myint draws on the following paragraph of The Wealth of Nations:
Between whatever places foreign trade is carried on, they all of them
derive two distinct beneits from it. It carries out that surplus part of
the produce of their land and labour for which there is no demand
among them, and brings back in return for it something else for which
there is a demand. It gives a value to their superluities, by exchanging
them for something else, which may satisfy a part of their wants, and
increase their enjoyments. By means of it, the narrowness of the home
market does not hinder the division of labour in any particular branch
of art or manufacture from being carried to the highest perfection. By
opening a more extensive market for whatever part of the produce of
their labour may exceed the home consumption, it encourages them to
improve its productive powers, and to augment its annual produce to
the utmost, and thereby to increase the real revenue and wealth of the
society. (WN IV.i.31)
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Myint argues that Smith’s “two distinct beneits” are irst a vent-forsurplus gain, because international trade “gives a value to their superluities,” and second a productivity gain, because international trade enhances
the division of labor and improves “its productive powers.” From the irst
gain, Myint (1958, 318) derives the “‘vent for surplus’ theory of international trade,” which assumes that an international market “provides an
outlet for the surplus product above domestic requirements.” From the
second gain, Myint derives the “productivity theory,” which shows how
“international trade also improves the division of labour and raises the
general level of productivity within the country” (318).
The classiication of the gains from foreign trade in Smith’s theory into a
vent-for-surplus gain and a productivity gain has been widely adopted since
Myint irst proposed it in 1958.1 Equally, the differentiation between a ventfor-surplus theory and a productivity theory in Smith’s theory of foreign
trade was not questioned much. However, most scholars emphasize the productivity theory, according to which foreign trade extends the market and
enables an enhanced division of labor and productivity growth. This productivity theory has built Smith’s reputation in international economics,
after he was generally seen as a poor trade theorist because he failed to
discover the theory of comparative advantage.2 This reappraisal was supported by New Trade Theorists, who claim Smith as one of their predecessors, especially regarding increasing returns (see, e.g., Krugman 1990, 4).3
1. Myint (1958, 318n) refers to John Stuart Mill and the international trade expert John H. Williams for the term “vent-for-surplus.” Mill ([1848] 1965, 591) uses the phrase “a vent for its surplus” in connection with Smith, and Williams (1929, 203) writes about “Mill’s famous objection
to Adam Smith’s ‘vent for surplus’ principle.” However, they do not divide Smith’s trade theory
into a vent-for-surplus and a productivity approach. Myint introduced this distinction irst, as he
himself acknowledges (Myint 1977, 242). The term “vent-for-surplus” itself was not new but
used widely, as the following examples demonstrate. James Syme (1821, 291) notes that external
trade is beneicial “by furnishing a vent for the surplus produce” (see also 327). James Mill
([1807] 2006, 138) argues against the idea that foreign trade “furnish[es] a vent for the produce
of the industry of the country,” and Thomas Mun ([1621] 1969, 50) writes that England “must
inde meanes, by Trade to vent our superluities.” Even David Ricardo ([1822] 2004, 241) writes
that “under a system of free trade . . . if an abundant harvest occurred . . . after an inconsiderable
fall of price, a vent for the superluous produce would be immediately found in exportation.”
2. Smith’s theory of international trade has been depicted by international trade economists
as a theory of absolute advantage and thus as a simple case of the more sophisticated theory of
comparative advantage. However, this representation, which is included in most modern textbooks on international economics, is an adulteration of Smith’s writings (Schumacher 2012).
3. Smith’s concept of the division of labor is often equated with increasing returns. The
neoclassical concept of increasing returns implies that when all factor inputs are increased by
an identical proportion, output increases in a greater proportion. Smith’s concept of the division
of labor, by contrast, is not so narrow but much more sophisticated.
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The vent-for-surplus theory, in contrast, has been more controversial.
Smith uses the terms “surplus produce” and “superluities” in connection
with foreign trade in several paragraphs of The Wealth of Nations. In one
often quoted paragraph, Smith states, “When the produce of any particular branch of industry exceeds what the demand of the country requires,
the surplus must be sent abroad, and exchanged for something for which
there is a demand at home. Without such exportation, a part of the productive labour of the country must cease, and the value of its annual produce
diminish” (WN II.v.33). In another paragraph Smith writes that “in every
period, indeed, of every society, the surplus part both of the rude and
manufactured produce, or that for which there is no demand at home,
must be sent abroad in order to be exchanged for something for which
there is some demand at home” (WN III.i.7).4
The scope of its application and what Smith meant by it has led to discussion among scholars. The different interpretations can be divided into
four groups, which are not necessarily mutually exclusive. First, it is
claimed that the vent-for-surplus theory can be applied only to certain
nations or goods. In his original approach, Myint (1958) argues that Smith
applies the vent-for-surplus theory only to underdeveloped nations. This is
repeated by others (Gomes 1987, 2003; Kindleberger 1964; Winch 1965),
while Denis O’Brien (1983, 93) suggests that it applies merely to advanced
nations. Myint later extended the vent-for-surplus theory to developed
countries but still excluded, in alleged accordance with Smith, “highly
advanced ‘commercial nations’” (1977, 243). Some stress that Smith’s ventfor-surplus gains can be realized only with agricultural or primary goods
(Myint 1977; Ros 2000) or in case of joint products (Kurz 1990, 1992;
West 1994).
Second, it is argued that Smith’s vent-for-surplus theory is bound to
certain presumptions or requirements, such as underemployed resources
(Bloomield 1981; Findlay and Lundahl 1994; Kibritçioglu 2002; Magnusson 2004; Meier 1994; Myint 1977, 1958; O’Brien 1975; Platteau 1978;
Rima 2004; Ros 2000; Staley 1973; Winch 1965), inelastic domestic
demand (Hollander 1973; Myint 1958; O’Brien 1975; Platteau 1978; Staley
1973), internal immobility or ixed resources (Myint 1958; Staley 1973),
speciicity of resources or factors (Hollander 1973; Myint 1958; Platteau 1978), indivisibilities (Winch 1965), a highly skewed resource base
4. Other paragraphs referred to in relation to Smith’s vent-for-surplus theory are WN I.xi.c.4,
II.v.4–6, II.v.16–18, II.v.24, II.v.34, II.v.36, III.i.1–2, III.iii.20, III.iv.5, IV.iii.c.4, IV.vii.c.4–9,
IV.vii.c.22, and IV.vii.c.47–50.
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(Kindleberger 1964), overproduction in general (Kindleberger 1964;
Morales Meoqui 2010; Rutherford 2002; Negishi 2004; West 1994), and
poor internal communications (Winch 1965, 8).
Third, some authors do not only stress the difference between the ventfor-surplus and the productivity theory but also assert that the former is
incompatible with Smith’s system of natural liberty and therefore at variance with Smith’s overall theory. These authors often refer to David
Ricardo and John Stuart Mill, who allegedly brought forward a similar
argument. To this group belong Leonard Gomes (1987), Charles E. Staley
(1973), and Jorge Morales Meoqui, who refers to Smith’s vent-for-surplus
gain as “error,” “theoretical law,” and “fallacy” (Morales Meoqui 2010,
42, 45). Added to this group can be those who agree that there is an
incompatibility between both, but that it can be solved. Lars Magnusson
argues that the productivity theory is Smith’s “general principle,” but that
it applies only in the long run. He implies that Smith “must . . . have been
sceptical as to whether this principle provided a very realistic picture of
the present,” because “there was a limit to the dynamics of market
forces” (Magnusson 2004, 34). Magnusson concludes that the vent-forsurplus theory holds in the short and medium terms. Nerio Naldi (1996,
212) claims that Smith’s references to surplus and superluities indeed
“conlict with some fundamental propositions of the WN.” However, this
should be seen as a “rhetorical form of speech” and should not be taken
at face value.5
Fourth, some have questioned that both gains lead to two different theories of international trade. Gottfried Haberler (1959, 9n) argues that
Myint’s distinction is “unconvincing” and suggests that the vent-for-surplus situation is “simply an extreme case of differences in comparative
cost.” Other authors emphasize that the “surplus” is mainly the result of
increasing returns and thus of specialization, as does Takashi Negishi
(1985, 1989). More recently, Negishi (2004, 34, 37) has similarly argued
that the productivity theory and the vent-for-surplus theory should be
understood “as two parts of Smith’s single disequilibrium theory of inter5. Naldi refers to Smith’s Lectures on Rhetoric and Belles Lettres (LRBL) and uses Smith’s
distinction between didactical and rhetorical discourse, the former being characterized by putting “before us the arguments on both sides of the question in their true light,” while the latter
“endeavours by all means to perswade us; and for this purpose it magniies all the arguments on
the one side and diminishes or conceals those that might be brought on the side conterary to that
which it is designed what we should favour” (LRBL i.149–50). Naldi argues that Smith uses the
rhetorical method when writing of “surplus” and “superluities.”
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national trade.” They both are “an indispensable part of Smith’s disequilibrium (or path-dependence) theory of international trade,” with the ventfor-surplus theory being “clearly a disequilibrium theory which explains
the cause of international trade in excess supply.” Both gains are seen as
inseparable. They do not occur independently but are complementary.
Robert Blecker (1997, 530) argues that “Smith’s apparently separate concepts of trade can thus be uniied as a theory of an international division
of labour.” Andrea Maneschi (1998, 48) describes the productivity and the
vent-for-surplus theory “as two sides of a coin,” and Bruce Elmslie and
Norman Sedgley (2002, 714) state that the “two gains from trade described
by Smith are codependent” (see also Elmslie and Sedgley 2003).
Yet each of these four groups exposes some inconsistencies. First,
Smith does not limit the terms “surplus produce” and “superluities” to
certain nations or certain goods. Rather, he talks of “every period, indeed,
of every society” and refers to diverse goods as surplus produce.6 Second,
although the listed assumptions are all conceivable explanations of a ventfor-surplus theory, they are not made by Smith himself, even though some
authors might claim this. The third group raises the question why Smith
would not have noticed such an incompatibility himself. Since he often
refers to “surplus produce” and “superluities” in connection with foreign
trade, it is unlikely that Smith just overlooked such a mistake. Magnusson’s explanation of short- and long-term developments is in itself consistent but not given by Smith himself.7 Naldi’s interpretation that Smith uses
a rhetorical discourse when he uses the terms “surplus produce” and
“superluities” is superluous if my interpretation below is correct. There
is no need to explain these terms as a rhetorical device, which leads to the
question whether the whole Wealth of Nations is merely a rhetorical discourse. Smith uses those terms not only when he polemicizes against mercantilist policies but throughout The Wealth of Nations.8 The fourth group
6. An extensive criticism of Heinz Kurz’s (1990, 1992) joint products interpretation can be
found in Elmslie 1996.
7. Magnusson is probably aware of this deiciency of his argument, which is why he adds
that this is an alternative interpretation “which might be even more realistic, given what we
know of Smith” (2004, 34).
8. Smith does not explicitly refer to the distinction between rhetorical and didactical discourse in The Wealth of Nations. However, The Wealth of Nations was intended as a scientiic
work and not merely as a polemic work against prevailing policies. Smith refers to the didactical discourse as “the best in all matters of Science” (LRBL ii.135), and it is thus implausible that
he used the rhetorical method throughout The Wealth of Nations. It could be argued that he uses
this method in book IV, but it is harder to claim that books I–III are rhetorical rather than didactical according to Smith’s deinitions of those methods, as Naldi implies (see also Brown 1994,
9–22, 162–64).
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raises the question why, if both gains were inseparable, would Smith talk
of these as “two distinct beneits” from foreign trade?
There is, however, one point of agreement between all authors in these
four groups. They do not question Myint’s categorizations per se. Authors
in the irst three groups assume that Smith uses the vent-for-surplus gain
and the productivity gain as two separate approaches in his theory.
Authors in the last group do not accept Myint’s conclusion that both gains
lead to separate approaches. They stress that both gains are complementary and are even interdependent. These authors have thus pointed to the
right direction, and I will use some similar arguments for my own interpretation below.9 Yet they do not repudiate Myint’s categorization outright. They still uphold that Smith himself classiied the gains from trade
accordingly.
2. Smith’s “Two Distinct Beneits”
In this section I will show that Myint’s categorization, although it has
been inluential, is wrong. On that point, I will irst discuss the meaning of
the terms “surplus produce” and “superluities” in Smith’s writings and in
the contemporary literature. Afterward, I will show whereof Smith’s “two
distinct beneits” from foreign trade are comprised. Reasons why Myint
and others misinterpreted Smith are given subsequently. Additionally, the
criticism of Smith’s gains from foreign trade by nineteenth-century classical economists will be outlined, since it too has been misunderstood in
the context of the debate about Smith’s alleged vent-for-surplus theory.
The Terms “Surplus Produce” and “Superluities”
Smith does not use the phrase “vent-for-surplus,” but he often speaks of
“surplus produce” and “superluities.” The division of labor, with which
The Wealth of Nations begins, leads to a specialization of laborers. As a
result, they do not produce merely for their own consumption, but they
need to exchange some part of their produce for other products that they
are in need of. This part of the produce is termed by Smith “surplus produce”: “The certainty of being able to exchange all that surplus part of
the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he may have
9. In a previous article, I myself supported this position in a short remark (Schumacher 2012,
59–60).
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occasion for, encourages every man to apply himself to a particular occupation” (WN I.ii.3).10 All goods that are produced not for the consumption
of their respective producer but for the market are described as surplus
produce. As we will see in the next paragraph, such surpluses exist
because there is a market for them. They would not be produced without a
market. An effective demand is the precondition for the production of a
surplus.
In this way, Smith describes the division of labor in different human
societies as an exchange of surplus produce, starting with “a tribe of hunters or shepherds” (WN I.ii.3). In a “civilized society,” the “exchange of
rude for manufactured produce” between towns and countryside is
described as an exchange of surpluses: “The town affords a market for the
surplus produce of the country” (WN III.i.1). The same is true for colonial
trade (WN IV.vii.c) and for foreign trade. If the market is extended beyond
national borders, the division of labor is enhanced. Some goods are then
produced for foreign trade because there is a demand for them from
abroad. From a national point of view, these goods are “surplus produce,”
as they are not sold or consumed domestically. In this context, the phrase
“no demand,” which Smith sometimes uses in conjunction with surplus
produce, has to be understood.11 In the case of foreign trade, it always
refers to the point of view of the nation. Smith equates “the surplus part
both of the rude and manufactured produce” with that part “for which
there is no demand at home” (WN III.i.7). The phrase “no demand” does
not mean that there is an overproduction, but refers solely to domestic
demand and to the term “surplus” as described here. Thus, the surplus
would not be produced in any case, that is, even without foreign trade. If
there was no overall demand for a commodity, it “would never be produced” (WN II.v.5). A surplus is produced only because there is a foreign
10. See also WN I.iv.1. Smith uses the terms “superluities” and “surplus” in relation to the
division of labor already in his earlier Lectures on Jurisprudence (LJ) and in the Early Draft of
Part of the Wealth of Nations (ED) (see, e.g., LJ(A) vi.47, LJ(B) 220, and ED 25). The meanings
of the terms “superluity” and “surplus” are not limited to the division of labor in Smith’s writings. Luxury goods, i.e., goods that are not necessities, especially diamonds, gold, and silver,
are also described as superluities (e.g., WN I.xi.e.38, I.xi.g.28, I.xi.m.18–19, I.xi.n.21, and V.
ii.k.7). Smith uses the term “surplus” in several other contexts; e.g., he describes the difference
between the rent and the necessary expenditure of the landlord as surplus (e.g., WN I.viii.19).
The difference between proits and the necessary expenditure of the capital owner, which Smith
labels “neat or clear proit” (WN I.ix.18), is also described as a surplus (see also WN I.viii.20).
But these alternative uses are not signiicant for this article.
11. Smith uses the phrase “no demand” in the context of surplus produce once for domestic
trade (WN II.v.5) and twice for foreign trade (WN III.i.7 and III.i.31).
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market. These commodities did not exist before foreign trade was established (see especially WN II.v). Thus, when Smith uses the terms “surplus
produce” and “superluities” in relation to foreign trade, he merely refers
to exports. Elmslie and Sedgley (2002, 718) state that they “count 40 times
in the Wealth where Smith uses the term surplus as synonymous with
exports.”12
As a consequence, if the demand for some goods collapses or the extent
of the market is decreased for another reason, those surplus products for
which there is no longer an effective demand will not be produced anymore. This is again true for every kind of exchange, including foreign
trade: “Those materials are a part of the surplus produce of those countries which, unless it was annually exchanged for something which is in
demand there, would be of no value, and would soon cease to be produced” (WN II.v.17).
It is not surprising that Smith himself does not speak of vent-for-surplus,
because in his theory there is no surplus that needs a vent. Smith’s notion
of “surplus produce” is not dependent on unemployed resources, inelastic
demand, specificity of resources, or other presumptions. Neither is it
opposed to his economic theory of natural liberty. When he talks of “surplus produce” he has neither “a surplus productive capacity in an isolated
economy,” as Myint (1958, 323) alleges, nor overproduction in mind.
Rather, he writes of “super-abundance” when he refers to unusable goods,
that is, goods that have no value and are thrown away. Even in the paragraph on which Heinz Kurz mainly relies for his joint-product interpretation (see Kurz 1990, 1992), Smith speaks irst of a superabundance of those
products, because “a great part of them is thrown away as useless” and is
therefore “of little or no value” (WN I.xi.c.3). But as soon as those goods—
in Smith’s example skins of animals—are traded with other nations, they
are described as surplus products: “the Europeans, with whom they now
exchange their surplus peltry, for blankets, ire-arms, and brandy, which
gives it some value” (WN I.xi.c.4). Thus, as soon as they are tradable and
have a value, they stop being superabundant and are surplus products
instead. This example is, however, the only time Smith argues that a superabundant produce becomes a tradable produce as the result of foreign
trade. In WN I.xi, Smith is concerned with rent, not with foreign trade.
Moreover, he describes in this example “nations of hunters and shepherds”
and this cannot be seen as a general rule for commercial societies.
12. This interpretation is also suggested by Arthur Bloomield (1975, 460), but he does not
pursue it any further and even discards it.
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The depiction of foreign trade as an exchange of surplus produce or
superluities is not peculiar to Smith but was common in his day. Dudley
North (1691, 2) states that “trade is nothing else but a Commutation of
Superluities.” Henry Martin ([1701] 1954, 69) writes that “by such an
universal Freedom of Trade, our Superluities wou’d be multiply’d, our
exportations wou’d be enlarg’d, our Bullion wou’d be increas’d, and the
more Money wou’d be still imploy’d in Trade” (see also 47, 56). William
Blake ([1810] 1857, 7) notes, “In the commercial dealings which take
place between any two nations, the surplus produce of the one will be
exchanged for the surplus produce of the other.” James Syme (1821, 291)
says that “the only use of commerce is to exchange the surplus produce of
one country for the surplus produce of other countries” (see also 24–26,
315–16). Others who use those terms in this sense include Thomas Mun
([1664] 1928, 8), David Fordyce ([1754] 2003, 98), James Steuart ([1767]
1805, 1:158, 2:2), John Wheatley (1803, 103–4), and Smith’s mentor Henry
Home (Lord Kames) (Kames 1774, 512).13 The description of exchange
between two people and of trade inside a nation as an exchange of surpluses was even more common: see, e.g., Hume [1777] 1987, 260–61;
James Mill [1821] 2006, 327; and Torrens 1808, 12, 18.
Smith’s Gains from Foreign Trade
The references to “surplus produce” and “superluities” in relation to foreign trade, therefore, do not justify the assumption of a vent-for-surplus
gain. This conclusion is sustained if we reexamine the crucial paragraph
quoted at the beginning of this article (WN IV.i.31): “Between whatever
places foreign trade is carried on, they all of them derive two distinct beneits from it.” In the next sentence, Smith speciies these two beneits: “It
carries out that surplus part of the produce of their land and labour for
which there is no demand among them, and brings back in return for it
something else for which there is a demand” (my emphasis). After having
discussed how Smith uses the term “surplus produce,” it is obvious that
the irst beneit consists of exports, while the second beneit in the latter
half of the sentence is imports. Hence, exports and imports are Smith’s
two distinct beneits from foreign trade.
From a modern perspective, this statement might seem idiosyncratic,
but it becomes clear when the context is considered. This paragraph is
13. This list is of course far from complete.
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part of book IV of The Wealth of Nations, in which Smith criticizes “two
different systems of political œconomy” (WN IV.2), namely, mercantilism
and physiocracy. His criticism is based on his own theoretical approach,
which he outlines in books II and III. He wants to show that both mercantilist and physiocratic policies do not lead to the most beneicial employment of capital for a nation.14 In chapter I of book IV, Smith deals with
mercantilism in general. According to Smith’s depiction,15 mercantilists
value exports as the sole gain from trade and only insofar as they lead to
specie inlows, while imports might even be harmful. He disagrees with
mercantilists for two main reasons: irst, the gain from exports does not
consist primarily in specie inlows;16 and second, exports are not the sole
beneit from foreign trade, but imports constitute a gain as well.
For Smith, the gains from foreign trade are not substantially different
from those of domestic trade, as the discussion of the terms “surplus produce” and “superluities” in the last section shows. Foreign trade resembles domestic trade (most emphatically in WN IV.v.b.39). However, Smith
separates foreign trade from domestic trade in his analysis throughout The
Wealth of Nations, and the nation is a level of analysis for him. From this
perspective, exports and imports can be described as peculiar to foreign
trade, even though their beneicial effects resemble the positive effects of
domestic trade. They both increase the wealth in a nation, which Smith
deines as “the annual produce of the land and labour of the society”
(WN Introduction).
14. For the most beneicial employment of capital, which occurs in a system of natural liberty, including the role of foreign trade, see especially WN II.v and III.i. To argue, as some have,
that Smith introduces a new approach to foreign trade in book IV is not plausible. Robert
Blecker (1997, 529), for example, states that “Smith introduced the vent-for-surplus notion in the
very same passage in which he introduced the market-widening (‘productivity’) concept, where
he considered them together as the ‘two distinct beneits’ that countries derive from their foreign trade.”
15. Smith describes the mercantilist position as follows: “The two principles being established, however, that wealth consisted in gold and silver, and that those metals could be brought
into a country which had no mines only by the balance of trade, or by exporting to a greater
value than it imported; it necessarily became the great object of political œconomy to diminish
as much as possible the importation of foreign goods for home-consumption, and to increase as
much as possible the exportation of the produce of domestick industry. Its two great engines for
enriching the country, therefore, were restraints upon importation, and encouragements to
exportation” (WN IV.i.35). This is a simpliied presentation of mercantilist thinkers, but the aim
here is to put Smith’s paragraph in context. To that end, it is not necessary to give a differentiated discussion of mercantilist positions.
16. Smith starts the paragraph concerned by stating that “the importation of gold and silver
is not the principal, much less the sole beneit which a nation derives from its foreign trade”
(WN IV.i.31).
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To increase wealth, more capital must be accumulated and employed
productively, so that there is a quantitative or a qualitative increase in productive labor: “The annual produce of the land and labour of any society
can be augmented only in two ways; either, irst, by some improvement
in the productive powers of the useful labour actually maintained within
it; or, secondly, by some increase in the quantity of that labour” (WN
IV.ix.34; see also WN II.iii.32). According to Smith, the wealth of a country is increased by productive labor, while unproductive labor does not
produce wealth.17 Smith argues that an economically progressing society
needs a positive “balance of the annual produce and consumption” (see
especially WN II.iii.14–18, IV.iii.c.15–17). Savings are the basis of capital
accumulation in Smith’s theory. Thus, he esteems parsimony and frugality: “Capitals are increased by parsimony, and diminished by prodigality
and misconduct” (WN II.iii.14). The motive for such behavior by individuals is “their universal, continual, and uninterrupted effort to better their
own condition” (WN II.iii.6). Thus, capital owners are not interested only
in consuming as much as possible, but in order to afford a better future,
they forgo immediate consumption. Yet parsimony alone is not enough.
Capital owners must also be able to employ their capital proitably; that is,
they have to be able to employ productive labor with it. In Smith’s theory,
foreign trade is beneicial because it has a positive inluence on parsimony
and the “good conduct” of people,18 offers an opportunity to employ capital productively, and improves the productive powers. Thereby, the wealth
of a society is increased through foreign trade.
Through imports, some commodities become cheaper, and goods that
are not produced domestically become available. More people might be
17. Smith deines productive and unproductive labor in chapter III of book II. As Walter Eltis
(1975, 434) shows, Smith’s distinction is not uniform but he gives three different criteria for
productive labor: “(i) whether employment produces a proit, (ii) whether employment produces
something storable, and (iii) whether a particular kind of employment can be continued indeinitely without new infusions of capital.” But as Eltis rightly notes, the most important difference in Smith’s theory “is between labour that produces and makes available goods that can be
used as capital and labour that does not” (434), which is also important in our context. Productive labor “produces a value” (WN II.iii.1), while unproductive labor does not (see also Trapp
1987, 229–37). The prime example of an unproductive laborer is the menial servant for Smith.
However, unproductive labor can be useful and necessary. Doctors, lawyers, and professional
soldiers, for instance, are also in this category. It is not a moral but merely an economic categorization by Smith.
18. Foreign trade is even responsible to some degree for “order and good government” and
thus “the liberty and security of individuals” (WN III.iv.4).
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able to buy those commodities.19 The variety and amount of available
goods in a nation is increased. Additionally, capital owners “may purchase an additional stock of materials, tools and provision” abroad that
they use in their production, because they are cheaper or not available
domestically (WN II.ii.33–35). Technological transfer is another positive
effect of foreign trade that is aligned to imports: it is a “mutual communication of knowledge and of all sorts of improvements which an extensive
commerce from all countries to all countries naturally, or rather necessarily, carries along with it” (WN IV.vii.c.80).20 Additionally, imports are
beneicial because of the effect of competition on the behavior of domestic
capital owners. Foreign competition decreases the chances of domestic
monopolies (e.g., WN IV.vii.c.102), which Smith sees as an obstacle to
economic growth and describes as “a great enemy to good management”
(WN I.xi.b.5). High proits, that is, proits above the natural rate, have
“bad effects [on] the country in general.” The most “fatal” effect resulting
from insuficient competition is that this “seems every where to destroy
that parsimony which in other circumstances is natural to the character of
the merchant.”21 The result is that “accumulation is thus prevented” and
that “the capital of the country, instead of increasing, gradually dwindles
away, and the quantity of productive labour maintained in it grows every
day less and less” (WN IV.vii.c.61). Thus, imports, by being a competition
to domestic producers, promote parsimony.
Exports are also beneicial on their own. The international market leads
to a higher effective demand for domestic products. Domestic producers
are able to enhance the division of labor as a result. The international
19. In the paragraph following the “two distinct beneits,” Smith gives a numerical example
of cheaper imports: “When a commodity comes to be sold for a third part of what had been its
usual price, not only those who purchased it before can purchase three times their former quantity, but it is brought down to the level of a much greater number of purchasers; perhaps to more
than ten, perhaps to more than twenty times the former number” (WN IV.i.32).
20. This includes the imitation of foreign commodities, which Smith assesses positively:
Merchants, “in order to save the expence of carriage, . . . establish some manufactures of the
same kind in their own country” (WN III.iii.16).
21. This is especially worrying because “the owners of the great mercantile capitals are
necessarily the leaders and conductors of the whole industry of every nation, and their example
has a much greater inluence upon the manners of the whole industrious part of it than that of
any other order of men. If his employer is attentive and parsimonious, the workman is very
likely to be so too; but if the master is dissolute and disorderly, the servant who shapes his work
according to the pattern which his master prescribes to him, will shape his life too according to
the example which he sets him” (WN IV.vii.c.61).
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demand “encourages them to improve its productive powers, and to augment its annual produce to the utmost, and thereby to increase the real
revenue and wealth of the society” (WN IV.i.31). It does so not only in the
exporting sectors, but in all production sectors, because technological
advances might be used in other sectors. Even agricultural production,
whose commodities are less a subject of foreign trade for Smith, might
improve as a result (see WN III.iv). Through foreign trade commodities
can be exported proitably. This provides capital owners an opportunity to
employ their capital more productively in the production of exports or in
trading activities. Without such an opportunity, some capital would either
be employed less productively or capital owners would use their income
for unproductive labor (e.g., WN III.iv.5). In this case, their behavior would
be wasteful rather than frugal. Foreign trade promotes parsimony and
thus capital accumulation also because it enables productive investment.
Related to this, foreign trade offers a channel for surplus capital (e.g.,
WN II.ii.30, 51; IV.vii.c.96). As Smith often states, if capital cannot be
employed at home, it could be invested abroad. In this way, domestic capital would still accumulate.
Thereby, imports and exports both lead to cheaper consumption and
encourage production, which Smith describes as “the two effects which it
is the great business of political œconomy to promote” (WN V.i.e.26).
Both increase the wealth of a nation. Consequently, Smith argues that the
balance of trade is irrelevant for a nation’s prospects. It can be positive or
negative for a long period and even in these cases foreign trade will still be
beneicial (see, e.g., WN IV.iii.c.17). This illustrates that both imports and
exports in themselves are beneicial.
Myint’s Misinterpretation
My scrutiny of Smith’s text contradicts Myint’s inluential categorization.
Smith’s two distinct beneits do not consist of a vent-for-surplus gain and
a productivity gain. From the previous examination it ensues that Smith
has no vent-for-surplus theory of international trade in the way it is understood nowadays. As to the productivity theory, it is true that foreign trade
leads to an increase in the productive powers of labor, according to Smith.
This resembles productivity gains from domestic trade. Smith has no separate theory of foreign trade, but foreign trade is embedded in his theory
of (domestic) capital accumulation. However, he uses the nation as a level
of analysis, and from this point of view foreign trade is beneicial as a
result of exports and imports for Smith.
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This raises the question, What led Myint to his false interpretation, and
why have so many scholars adopted it? First, Myint and others base their
categorization not on the sentence naming the two beneits, but on the following sentences in IV.i.31, in which Smith explains how imports and
exports are beneicial for a country. Thus, the explanation of the beneits
is confused with the beneits themselves. Second, the terms “surplus produce” and “superluities” are misinterpreted. Their meaning in modern
economics differs from Smith’s meaning of the words, that is, as commodities that are exported. However, Myint and others attribute the modern meaning to Smith. A third reason might be that modern economists
are used to deriving gains from trade by comparing autarkic or isolated
nations with a situation in which international trade is established. Many
scholars stress, when discussing Smith’s supposed “vent-for-surplus”
approach, that such gains occur only when an autarkic country starts
engaging in international trade, as Myint (1958) does in his original contribution.22 Only in such a framework is it understandable to argue that
international trade provides “the new effective demand for the output of
the surplus resources which would have remained unused in the absence
of trade” (Myint 1958, 321) and superluities in the modern sense might be
imaginable. However, Smith assumes that only precommercial societies
were really isolated. When discussing foreign trade and its gains, he does
not assume two autarkic nations that start trading. Rather, they are already
engaged in trade. Smith describes the beneits of ongoing foreign trade
that are realized constantly while conducting trade: “These great and
important services foreign trade is continually occupied in performing, to
all the different countries between which it is carried on” (WN IV.i.31).
These beneits are not once-and-for-all, as the vent-for-surplus argument
might suggest. Smith does not assume that there is overproduction before
trade. The “surplus produce” of a nation is the result of an effective foreign demand. It does not exist prior to trade.
A reason why Myint’s misinterpretation became the standard interpretation of Smith’s gains from trade is its adoption by established scholars.
For example, the editors of the inluential Glasgow Edition of the Works
and Correspondence of Adam Smith included a footnote to WN IV.i.31
stating that “the doctrine of ‘vent for surplus’ was widely applied: see, for
example, II.v.33, III.i.1. and IV.iii.c.4.” This prominently placed comment
gave the vent-for-surplus interpretation legitimacy and reinforced it.
22. Among them are Findlay and Lundahl (1994), Gomes (1987, 2003), Kindleberger (1964),
Meier (1994), Negishi (2004), O’Brien (1975), Platteau (1978), and Winch (1965).
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Ricardo’s and Mill’s Criticism
As mentioned above, some scholars argue that Smith’s alleged vent-forsurplus theory contradicts his system of natural liberty. Those scholars
often invoke David Ricardo and John Stuart Mill for their argument. In
the following, the criticism of Ricardo and Mill should be briely discussed in order to get a better understanding. The aim is not to defend
Smith against Ricardo and Mill but to put their criticism in context,
because it too is misrepresented. First, they criticize Smith’s wording
because an overproduction could be inferred from it. Second, they misunderstand Smith when he notes that “a part of the productive labour of the
country must cease.” Third, the difference between Smith and classical
economists in the nineteenth century lies in the assessment of exports.
The latter do not see exports as a gain from trade.
Ricardo is seen as the irst one who criticized Smith’s vent-for-surplus
approach. Ricardo, in his Principles, comments on WN II.v.33. Before
quoting Ricardo’s comments, let us recall what Smith writes:
When the produce of any particular branch of industry exceeds what
the demand of the country requires, the surplus must be sent abroad,
and exchanged for something for which there is a demand at home.
Without such exportation, a part of the productive labour of the country
must cease, and the value of its annual produce diminish. The land and
labour of Great Britain produce generally more corn, woollens, and
hard ware, than the demand of the home-market requires. The surplus
part of them, therefore, must be sent abroad, and exchanged for something for which there is a demand at home. It is only by means of such
exportation, that this surplus can acquire a value suficient to compensate the labour and expense of producing it.
In response hereto, Ricardo ([1817] 2004, 291n) states the following:
One would be led to think by the above passage, that Adam Smith concluded we were under some necessity of producing a surplus of corn,
woollen goods, and hardware, and that the capital which produced
them could not be otherwise employed. It is, however, always a matter
of choice in what way a capital shall be employed, and therefore there
can never, for any length of time, be a surplus of any commodity; for if
there were, it would fall below its natural price, and capital would be
removed to some more proitable employment. No writer has more satisfactorily and ably shewn than Dr. Smith, the tendency of capital to
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move from employments in which the goods produced do not repay by
their price the whole expenses, including the ordinary proits, of producing and bringing them to market.23
Ricardo’s quotation appears in a footnote in a chapter headed “Effects
of Accumulation on Proits and Interest,” which does not deal particularly
with foreign trade. Here, Ricardo tries to defend what became known as
the law of markets: “M. Say has, however, most satisfactorily shewn, that
there is no amount of capital which may not be employed in a country,
because demand is only limited by production” (290). His aim is to demonstrate that an overproduction is not possible: “Too much of a particular
commodity may be produced, of which there may be such a glut in the
market, as not to repay the capital expended on it; but this cannot be the
case with respect to all commodities” (292). This is not so much directed
against Smith as against Thomas Robert Malthus, who argues that a “general” or “universal glut” is not only possible but likely to appear, which he
deines as follows: “A glut is said to be general, when, either from superabundance of supply or diminution of demand, a considerable mass of
commodities falls below the elementary costs of production” ([1827]
1986, 113).24 Ricardo vehemently opposes Malthus’s position. In this context he criticizes Smith. Here, Ricardo is not concerned with foreign trade
but with the impossibility of a general glut. His criticism is aimed at
Smith’s choice of words, not at the substance of his argument. Ricardo
admits that a theory of overproduction is not what Smith had in mind, as
he states in the second half of his quotation above.
John Stuart Mill ([1848] 1965, 592) has the same concerns: “The
expression, surplus produce, seems to imply that a country is under some
kind of necessity of producing the corn or cloth which it exports; so that
the portion which it does not itself consume, if not wanted and consumed elsewhere, would either be produced in sheer waste, or if it were
23. This criticism has been repeated by others, e.g., James Angell (1926) and Lionel Robbins
(1958).
24. Malthus ([1820] 1986, 254) states that Jean-Baptiste Say “has indeed gone so far as to
state that the consumption of a commodity by taking it out of the market diminishes demand,
and the production of a commodity porportionably increases it. This doctrine, however, . . .
appears to me to be utterly unfounded, and completely to contradict the great principles which
regulate supply and demand.” Malthus adds that in this respect “M. Say, Mr. Mill, and Mr.
Ricardo . . . appear to me to have fallen into some fundamental errors in the view which they
have taken of this subject” (255). It is not necessary to give a full account of the debate between
Ricardo and Malthus on the possibility of a general glut here. This can be found in Maclachlan
1999 and Sowell 1963.
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not produced, the corresponding portion of capital would remain idle.”
But he is less indulgent with Smith and calls his approach “entirely erroneous,” because the law of markets prevents surpluses to be produced or
capital to remain idle (592–93). Mill argues that Smith’s theory is close to
“the fallacy of general over-production” (593), which he ascribes to Malthus and which he vigorously rejects (see especially Mill [1848] 1965,
570–76).
However, Smith never states that there would be a general overproduction or a universal glut if foreign trade ceased, as Ricardo himself points
out. Indeed, Smith is quite clear that a general overproduction or underconsumption is not present in his system of natural liberty: “What is
annually saved is as regularly consumed as what is annually spent, and
nearly in the same time too; but it is consumed by a different set of people” (WN II.iii.18). Of course, Smith did not endorse what became known
as the law of markets or reject Malthus’s concept of a general glut explicitly, because both were unknown to him. However, Ricardo and Mill must
have feared that phrases such as “surplus must be sent abroad” could be
interpreted in a way to support Malthus’s argument, particularly considering that Malthus “professed to interpret Adam Smith as the true prophet”
(Stephen 1900, 238), as did Ricardo and Mill themselves.
Second, there seems to be a misunderstanding about what Smith means
when he says that “without such exportation, a part of the productive
labour of the country must cease” (II.v.33; my emphasis; see also II.v.34).
Ricardo, Mill, and also modern scholars seem to interpret this as meaning
that the ceasing of trade, or more speciically exports, would lead to unemployment of workers and capital. In a comment directed against Smith,
Mill ([1848] 1965, 592) notes that if foreign trade ceases, “the labour and
capital which had been employed in producing with a view to exportation,
would ind immediate25 employment in producing those desirable objects
which were previously brought from abroad: or, if some of them could not
be produced, in producing substitutes for them.” A similar argument can
be found in Ricardo’s Principles ([1817] 2004, 294–95). However, Smith
would agree with this. He does not argue that unemployment will result if
foreign trade ceases. Yet, Smith does argue that workers and thus capital
would be employed less productively. Here, the differentiation between
productive and unproductive employment discussed above becomes crucial.26 If trade ceases, some part of the former productive labor would be
25. Mill deleted the word “immediate” from the third edition onward.
26. Elmslie and Sedgley (2002, 2003) use a similar argument.
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reemployed either less productively or turned into unproductive labor. In
the worst case, the capital used to produce exports would be employed in
the maintenance of unproductive labor, due to a lack of other investment
opportunities. In this case, this capital would not add to the wealth of the
country at all, and its owner could use it only for “rustick hospitality at
home” but not in commerce (WN III.iv.5; see also V.i.g.22). Even if the
capital owner could still employ his or her capital in a productive way, it
would be in a less productive way than before. In any case, the potential
opulence of a nation is reduced. This is most evident when Smith discusses
the effects of policies that restrict or terminate foreign trade: the “industry
of the country . . . is thus turned away from a more, to a less advantageous
employment, and the exchangeable value of its annual produce . . . must
necessarily be diminished” (WN IV.ii.12). The quantity of laborers
employed remains the same, because it is determined by the quantity of
accumulated capital: “The capital of the country remaining the same, the
demand for labour will likewise be the same, or very nearly the same,
though it may be exerted in different places and for different occupations”
(WN IV.ii.42). Thus, Smith does not assume that capital and labor will
become unemployed if trade ceases but that they will be employed less
productively. Yet besides Mill and Ricardo, many modern interpreters do
claim this. Samuel Hollander (1973, 268), for example, comments on WN
II.v.33 that “trade absorbs the output of factors otherwise unemployed.”
Similar, Nerio Naldi (1996, 215) misleadingly omits the word “productive” and writes about “Smith’s statement concerning the fact that labour
must cease without the exportation of the domestic surplus.”
Third, the main difference between nineteenth-century classical economists on the one hand and Smith on the other is their assessment of
exports. For Smith, they form a distinct beneit from foreign trade, as do
imports. In contrast, the former value only imports as the sole beneit of
foreign trade, while exports do not constitute a gain. This view is most
clearly depicted by James Mill ([1821] 2006, 275): “When one nation
exchanges a part of its commodities for a part of the commodities of
another nation, the nation can gain nothing by parting with its commodities; all the gain must consist in what it receives.”27 John Stuart Mill
27. See also pp. 105–25 of James Mill [1807] 2006, in which he states that “the export commerce of Great Britain is productive of no wealth” (118). This is directed mainly against mercantilists in general, who argue that the beneits from trade consist solely of exports, and against
William Spence in particular, who writes “that no riches, no increase of national wealth, can in
any case be derived from commerce of import” and that “national wealth may, in some cases,
be derived from commerce of export” (Spence 1807, 38).
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([1848] 1965, 591) holds the same view: “the only direct advantage of
foreign commerce consists in the imports,”28 as does Robert Torrens
(1808, 49–50, 53). Ricardo ([1820] 2004, 407) also follows this assessment
of imports and exports: “It will be of immense importance to buy cheap,
that is to say to obtain plenty of commodities for a little value; and inasmuch as foreign trade, and an extensive market, enables them to do this, it
is beneicial to the country” (see also Ricardo [1815] 2004, 25–26; and
[1817] 2004, 133).29 Exports are necessary to pay for imports. But they do
not constitute an additional beneit, as Smith maintains. In a reference
to Smith, John Stuart Mill ([1844] 1967, 253) notes that “political economists . . . have occasionally suffered themselves to employ language evincing inattention to the fact, that exports, though unimportant in themselves,
are important by their inluence on imports.” In this context, John Stuart
Mill charges Smith with adhering to “a surviving relic of the Mercantile
Theory.” This relic is the view that exports constitute a beneit from foreign
trade. This relic is not, as claimed nowadays, a modern vent-for-surplus
gain. The modern misinterpretation of Smith’s gains from trade has also
led to a misinterpretation of Mill’s criticism of Smith.30 Mill’s charge is
directed against Smith’s view that exports are a gain from foreign trade.
3. Conclusion
Myint’s claim that Smith’s two distinct beneits from foreign trade consist
irst of a vent-for-surplus gain and second of a productivity gain has been
widely adopted and it has not been questioned. However, this separation
and especially the vent-for-surplus gain have caused a lot of confusion and
discussion. Arthur Bloomield (1975, 472) once called the meaning of
Smith’s vent-for-surplus theory a “mystery.” Yet this mystery does not
exist in Smith’s writings but is made up by his interpreters. As I discussed
in this article, Myint’s categorization is wrong. Smith’s two distinct beneits are imports and exports.
28. See also Mill [1826] 1967, 130; [1844] 1967, 233, 253.
29. The same is true for Ricardo’s ([1817] 2004, 134–36) famous England-Portugal example.
Imports constitute the gains, because both nations can save laborers by the respective imported
goods (England “gains the labour of 20 Englishmen” and “Portugal gains the labour of 10 Portuguese” [Sraffa 1930, 541]). Exports are not described as beneicial in themselves.
30. Incorrectly, Morales Meoqui (2010, 39–41) ascribes the view that only imports are beneicial while exports constitute the necessary cost of imports to Smith, as does Charles Bastable
(1897, 20). Thereby, Morales Meoqui tries to link Smith’s theory of foreign trade to Ricardo and
Mill. He completely overlooks the fact that Mill criticizes Smith for maintaining that exports
constitute a gain.
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Smith has no vent-for-surplus theory in the modern sense. He rather
uses the terms “surplus produce” and “superluities” as a synonym for
exchanged goods and in the case of foreign trade, these are exports. With
his position on the gains from trade, he differs from both mercantilists
and classical economists of the nineteenth century. The latter reject
Smith’s gains from trade, because they include exports as a distinct gain.
This part of Smith’s theory is dismissed by John Stuart Mill as a mercantilist relic, a critique which in turn has also been misunderstood by modern scholars.
This does not mean that modern vent-for-surplus theories cannot be a
useful tool in modern economics. They have been used in development
economics in several studies in an attempt to try to explain the effects of
international trade on a previously isolated country exporting primary
goods, as was proposed by Myint (e.g., Caves 1965; Drake 1979; Findlay
and Lundahl 1994; Fuglie 1991; Smith 1976).31 I do not intend to assess
these modern approaches in this article. My point is rather that such theories cannot be attributed to Smith and that representatives of modern ventfor-surplus theories should not refer to Smith as their forerunner.32
Other economists might be better suited as precursors of modern ventfor-surplus theories. Bloomield (1981, 100) notes that a paragraph of
James Maitland (Earl of Lauderdale) could “be regarded as an early anticipation of modern ‘vent for surplus models.’”33 Furthermore, Bloomield
detects “elements of a ‘vent for surplus’ theory” (101) in Malthus’s Principles of Political Economy. There is, however, one classical economist
who could be better placed as an early forerunner and this is, of all people,
31. In his original contribution, Myint (1958, 326, 330) argues that “the ‘vent-for-surplus’
theory provides a more effective approach than the comparative-costs theory to the international trade of the underdeveloped countries,” the paradigm being “the typical case of a peasant
export economy.” Later, he suggests that “the vent for surplus theory may be extended on a
somewhat different basis to the agricultural surpluses of the advanced countries such as the
United States and the EEC countries” (1987b, 804). Gerald Meier (1994, 15) concludes that a
vent-for-surplus approach “has helped to illuminate some historical episodes of nineteenth century development.” An appraisal of the vent-for-surplus theory by Myint himself can be found
in Myint 1987a, 120–23. Marion Johnson (1974) and R. M. Sundrum (1994) discuss the limits
of a vent-for-surplus theory, while Barbara Ingham (1979, 1981) criticizes the “neoclassical version of vent for surplus.”
32. I do not dispute that Myint’s vent-for-surplus theory really was inspired by Smith. However, if it was, this inspiration would be based on a misunderstanding of Smith.
33. Lauderdale (1804, 353) writes “that commerce . . . must be considered as a cause to
increase industry; for, by promoting an interchange of commodities betwixt two countries, it
becomes a most powerful agent in extending the demand for the commodities of each, enriching the one and the other, by exciting a quantity of industry that would otherwise have remained
dormant; but which, when thus brought into activity, augments the production of both.”
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John Stuart Mill. Under “indirect beneits of commerce” he names what is
comparable to modern vent-for-surplus arguments:
There is another consideration, principally applicable to an early stage
of industrial advancement. A people may be in a quiescent, indolent,
uncultivated state, with all their tastes either fully satisied or entirely
undeveloped, and they may fail to put forth the whole of their productive energies for want of any suficient object of desire. The opening of
a foreign trade, by making them acquainted with new objects, or tempting them by the easier acquisition of things which they had not previously thought attainable, sometimes works a sort of industrial revolution in a country whose resources were previously undeveloped for
want of energy and ambition in the people: inducing those who were
satisied with scanty comforts and little work, to work harder for the
gratiication of their new tastes, and even to save, and accumulate capital, for the still more complete satisfaction of those tastes at a future
time. (Mill [1848] 1965, 593–94)
Here, Mill assumes an isolated country without foreign trade that has some
un- or underemployed resources. Foreign trade can be beneicial for such a
country because it establishes an international demand for goods that can
be produced with these existing but unused resources. This idea corresponds to modern vent-for-surplus approaches. Those previously idle
resources are used productively because of foreign trade. This might be a
surprising conclusion, because Mill is often seen as one of the irst who
criticized Smith’s vent-for-surplus theory. However, this is entirely compatible with the analysis of this article. As we have seen, Mill criticizes Smith
for assuming that exports constitute a gain from foreign trade besides
imports, not for bringing forward a vent-for-surplus argument in the modern sense.
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