Adam Smith's “Two Distinct Benefits” From Trade: The Dead End of “Vent-for-Surplus” Interpretations

Hla Myint interpreted Adam Smith's “two distinct benefits” from foreign trade as a vent-for-surplus gain and a productivity gain. This classification has been adopted widely, but the vent-for-surplus gain has caused some debates. In this article, I show that Myint's categorization is based on a misinterpretation. Smith's two distinct benefits consist of exports and imports. Additionally, Smith does not expound a vent-for-surplus theory. Besides Smith's true benefits from trade, I discuss reasons for their modern misinterpretation and David Ricardo's and John Stuart Mill's criticism of Smith's theory, which is often misunderstood as well.