On the transformation of theorems

Professor W. Ethier (1979) has argued that replacing land by capital in the familiar 2×2 trade model leaves the four basic theorems unaffected, with time-phasing and a positive interest rate. In fact, Ethier's HOS and FPE theorems are different in kind from the traditional ones. The traditional theorems predict certain results in terms of trade-independent data: Ethier's theorems describe equilibrium in terms of factor endowments and intensities defined by equilibrium prices. Hence his theorems do not support his central message that nothing is lost in trade theory by treating capital as if it were homogeneous land.