Vent for surplus

Vent for surplus is a theory that was formulated by Adam Smith and later revised by Hla Myint on his thesis of South East Asia. The theory states that when a country produces more than it can consume it produces a surplus. This underutilization causes an inward movement on the production possibilities frontier. Trade with another country is then used to vent off this surplus and to bring the production possibilities frontier back to full capacity.

Concerning the classical formulation of the theory (by Adam Smith), John Stuart Mill, in his ‘’Principles of Political Economy’’ says, that the “vent for surplus” approach is “in truth a surviving relic of the Mercantile Theory, according to which, money being the only wealth, selling, or in other words, exchanging goods for money, was (to countries without mines of their own) the only way of growing rich—and importation of goods, that is to say, parting with money, was so much subtracted from the benefit.”

Sources

• Mill, John Stuart (1871). Principles of Political Economy  (7th ed.) – via Wikisource.

External links

• Vent for Surplus on "economyprofessor.com" (via Internet Archive; version 2011-03-12; accessed 2019-06-13).