The Enquiry has sometimes been judged to be significant for the development of twentieth-century trade theory. Thus Paul Samuelson has judged that the Enquiry helped ‘set off an analytical controversy that has helped shape the discovery of what has come to be known as modern international trade theory’ (Samuelson 1981, p. 147). By ‘modern international trade theory’, Samuelson means mid-twentieth-century trade theory, which is distinct from both the classical trade theory of Ricardo and the ‘post-classical theory’ of Mill and Marshall. In classical trade theory, labour was the only factor of production. The post-classical theory of Mill and Marshall discarded the labour theory of value, but effectively retained labour as the only variable factor. Between 1933 and 1949 Bertil Ohlin and Paul Samuelson recast trade theory by analysing trade in a general equilibrium framework with (at least) two variable factors: capital and labour.

One of the landmarks in the modern theory of international trade was the 1941 proof of Samuelson and Wolfgang Stolper that higher tariffs would unambiguously increase real wages if the country’s import-competing sector had a higher labour–capital labour ratio than the export-competing sector. Thus the old protectionist notion that ‘protection protects high wages’ seemed suddenly to have a solid theoretical foundation. The Enquiry of 1929 seemed highly significant here because it had annoyed certain authorities in neoclassical trade theory (such as Jacob Viner) by contending that higher protection did increase real wages. On this ground the Enquiry has been presented by one commentator as ‘a final step between neoclassical trade theory and Ohlin’s treatise of 1933’ (Cain 1973). Nevertheless, Samuelson himself has written: ‘I have to testify it was Wolfgang Stolper’s original insight that the Ohlin [1933] analysis provided some vindication for the view that the US tariff might raise real wages here, and not the almost simultaneous … analysis of the Australian problem, that spawned Stolper-Samuelson’ (1981, p. 150). Samuelson describes the episode as ‘a plum pudding of Mertonian doubletons of quasi-independent analytic discoveries’ (1981, p. 158). ‘In my view some of the Australian experts independently stumbled on some of what are today known as Hecksher-Ohlin-Samuelson notions that free trade can lower real returns on a factor where it is “relatively scarce”’ (private communication to the authors).

What conclusion might an adjudication of this clash of testimony yield about the likely significance of the Enquiry for modern trade theory?

An adjudication would begin by noting that the authors of the Enquiry strived to bring it to the attention of the intellectual centres. Review copies were sent to overseas journals, with complimentary copies to Keynes, Clapham, Pigou, Ralph Hawtrey, Hugh Dalton, Lionel Robbins, Cannan, Wesley Mitchell, Frank Taussig, and others. But this had little effect. Keynes did write to his friend Giblin to say the Enquiry was ‘of the highest interest and a very brilliant effort’ (quoted in Harper 1989). But it was negatively reviewed in the Economic Journal. Viner gave his own cool, forensic and almost relentlessly negative review in the Economic Record.^[10] Australian academic opinion was not more enthusiastic. Shann complained that the authors of the Enquiry had ‘thrown the mantle of their authority’ over ‘pleas for monopoly’ (Shann 1938, p. 412). Leslie Melville (1902-2002) judged the Enquiry to have produced an ‘ingenious fantasy that is not wholly fantastic’. Although its thesis was ‘theoretically attractive’, ‘the calculations of the Committee have not materially strengthened the argument’ (Melville 1929).

When in 1931 Copland sought (with Taussig’s encouragement) to ventilate the matter in the Quarterly Journal of Economics, his paper was sensibly entitled ‘A neglected phase of tariff controversy’.^[11] The Enquiry seems to have been preserved from oblivion by an attempt of a disciple of Taussig, Karl Anderson, to ensure its oblivion. In 1938 Anderson sought to comprehensively dispose of the ‘Australian case for protection’ in a paper in the Quarterly Journal of Economics (Anderson 1938). Anderson had absorbed the literature: Brigden’s ‘The Australian tariff and the standard of living’; the Enquiry (he quotes from it); Copland (1931b); Viner (1929); and Loveday (1931).

In 1939 Marion Crawford Samuelson (1916–78) advanced a riposte to Anderson’s attempted rebuttal of the Enquiry (Samuelson 1939). But Samuelson’s paper is almost entirely devoted to the terms-of-trade argument, and only refers to the returns-to-labour argument by way of a concluding comment. This suggests that her acquaintance with the Enquiry and literature in the Record was not close.^[12] In referring to the Australian ‘case’ M. C. Samuelson never mentions names or publications. Paul Samuelson later wrote: ‘With great probability, M. C. had never read the 1929 Report’ (1981, p. 151). There are doubts if she read the Copland paper that Anderson was seeking to obliterate. As we have noted, she stresses the terms-of-trade argument, although Copland completely ignores it. Samuelson merely says, non-commitally, she ‘may have’ read Copland (Samuelson 1981, p. 153).

In 1941 Samuelson wrote with Stolper, and Marion as amanuensis, ‘Protection and real wages’ (Stolper and Samuelson 1941). The authors review the literature on this issue, the great bulk of which is hostile to the thesis that protection increases real wages, and refer to Bastable’s note of the Sidgwick argument. The authors do not refer to the Enquiry, and Samuelson later stated that he had not read it. In the conclusion he suggests the Australian economy may be illustrative of the Stolper-Samuelson theorem, and refers the reader without any further explication to the papers of Copland, M. C. Samuelson and Anderson.

What is to be concluded? It is helpful to make a distinction between the thesis of the case and the argument of the case.

We contend that the argument of the case had no significance for the development of ‘modern trade theory’. Firstly, Samuelson had not read the argument in the Enquiry, or any of the surrounding literature, with the possible exception of Copland (1931b). Secondly, Samuelson was in any case already aware of the older literature of Sidgwick and Bastable expounding the ‘Sidgwick Sufficiency Condition’. Thirdly, and most importantly, the case was irrelevant to the argument of modern trade theory. Modern trade theory turns on the mobility of capital between sectors. But capital and its mobility, is totally ignored by the case.^[13]

Nevertheless, it is plausible that the thesis of the case was significant for the development of ‘modern trade theory’. In the expectant and restless atmosphere of post-war theorising, the Enquiry provided the spectacle of ‘distinguished economists’ (Irwin 1996) boldly pressing the unorthodox notion that protection increased real wages. This notion was effectively defended from one line of criticism by Marion Samuelson. In other words, M. C. Samuelson had shown there could not be an ‘impossibility theorem’ regarding the notion. A possibility had materialised. In Samuelson’s own words: ‘I at least had very much in mind at the time of the Stolper-Samuelson investigations the definitive 1939 findings by Marion Samuelson that verified the correctness of the ‘Australian case for the tariff”’ (Samuelson 1987, p. 241).