1940/11/01 by Nicholas Kaldor
Economics, Econometrics and Finance · #Global trade and economics
paper · doi:10.2307/2550231
i. In the foregoing paper Dr. Benham raises the question whether the advantage accruing to a country througlh improvement in the terms of trade, consequent upon the imposition of a tariff, could compensate for the disadvantage arising on account of a smaller volume of trade. It can be demonstrated that the introduction of a system of import duties will always improve the position of the country imposing it, provided that the rate of duty is below a certain critical level, and provided also that the introduction of the tariff does not lead to retaliation, in the form of the imposition of higher duties, by other countries.' It can also be shown that there is a particular rate of duty which makes the net advantage accruing from the tariff a maximum.2 2. Our demonstrationi is based on the Edgeworth barter diagram, and since the two parties in question here are two nations, and not two individuals, it employs the concept of community indifference curves , of which it is necessary to say a few words. A community indifference curve is the locus of points representing a constant real income for the community as a whole. In so far as individuals' tastes differ or their money-incomes differ, or the distribution of incomes varies, positions representing a constant real income for the community as a whole do not imply an unchanged real income for each individual taken separately. Some individuals will be worse off (as between two such positions) and others better off. But the real income can nevertheless