A Swedish economist and economic historian who was considered a groundbreaker in both economic history and trade theory.
Eli Filip Heckscher is known for his article “The Effect of Foreign Trade on the Distribution of Income” (1919), which maintained that the types of commodities that a nation exports depends entirely on the nation’s endowment of resources. This scholarly masterpiece broke from classical international trade theory and introduced what became the Heckscher-Ohlin model of international trade. Born in Stockholm, Sweden, he studied at Uppsala University where he was a student of David Davidson. He did his doctoral work at Stockholm University under Gustav Cassel.
Heckscher’s doctoral dissertation was entitled “On the Importance of Railroads to Sweden’s Economic Development.” After finishing his doctorate, he served with a Swedish government committee as permanent secretary. In 1909, he was appointed professor of economics and statistics at the Stockholm School of Economics. Heckscher’s academic interests were in both history and economics. His scholarship became largely focused on economic history, where he broke new ground. In 1929, Heckscher was appointed to a research professorship in economic history at the Stockholm School of Economics and was made chair of the Economic History Institute (now called the Institute for Research in Economic History).
Heckscher’s opus “The Effect of Foreign Trade in the Distribution of Income,” which was translated into English in 1949 in Readings in Theory of International Trade, broke from the classical international trade theory of predecessors like Adam Smith and David Ricardo. In this article, Heckscher developed the rudiments of the factor endowment theory of international trade by predicting the pattern of trade between nations centered on the characteristics of those countries. The Heckscher-Ohlin theorem states that a relatively capital-abundant country will export a relatively capital-intensive commodity. The theory is expressed in terms of factor intensity and factor abundance. Not only natural resources such as water, land, and miner-als were considered, but also supplies of labor and capital. Simply stated, Heckscher-Ohlin claims that a nation will export the commodity whose production requires the intensive use of the nation’s relatively abundant and cheap factor and import the commodity whose production requires the intensive use of the nation’s relatively scarce and expensive factor. Therefore, the capital-abundant country will have a comparative advantage in the production of goods that are capital intensive. The country in which labor is plentiful will have a relative advantage in the production of goods that are labor intensive. Under this model, the opening of trade implies a movement toward factor-price equalization. The theorem connotes that free trade will result in the equalization of factor prices internationally. So then, the basis of trade is the difference in prices because of differences in factor abundance. Trade may then happen because of these differences. Heckscher’s student Bertil Ohlin developed and elaborated the factor of endowment theory and went on to prominence in the field of economics. He received the Nobel Memorial Prize in economic sciences in 1979 for his work on international trade theory. There have since been many enlargements of the Heckscher-Ohlin theorem, most notably those of Paul Samuelson and Jaroslav Vanek.
Heckscher was a prolific writer, with over 1,000 works to his credit. His two-volume tome Mercantilism (1931) is considered a landmark work of twentieth-century economic history. The work appeared first in Heckscher’s native Swedish, then in German in 1932, and in English in 1934. In it, he details the genesis, expansion, and workings of mercantilism over the sixteenth through the eighteenth centuries, covering every major European country. Heckscher viewed the mercantile system as embodying the political and economic values of competitive young nation-states. He refuted the arguments of Adam Smith for saving and investment and questioned the validity of mercantile theory that held that the way for a nation to become rich was to export more than it imported. Heckscher was successful in identifying a set of mercantilism’s significant characteristics, the pursuit of power being the most important.
Mercantilism was regarded the first contemporary fusion of mercantile theory and practice and drew much criticism from his contemporaries in the field of economic history. Heckscher’s other major works include Ekonomisk historia: nara antydningar (1904), The Continental System: An Economic Interpretation (1918), A Plea for a Theory in Economic History (1929), Monetary History from 1914 to 1925 (1930), and An Economic History of Sweden (1954), which covers 400 years of Sweden up to the early twentieth century. He died at the age of seventy-three in 1952.
Arthur Holst
See also: Ricardo, David; Smith, Adam.
“Eli F. Heckscher.” EHF Institute for Research in Economic History (www.hhs.se/EHF/Html/DefHeckscher1b.htm, accessed November 2002).
Irwin, Douglas A. Against the Tide: An Intellectual History of Free Trade. Princeton: Princeton University Press, 1996.
McCusker, John J. “Review of Eli F. Heckscher Mercantilism.” Economic History Services (www.eh.net/bookreviews/library/mccusker.shtml, accessed December 2002).
Sandmo, Agnar. Globalisation and the Welfare State: More Inequality–Less Redistribution? Bergen: Norwegian School of Economics and Business Administration, 2002.