I. INTRODUCTION

The law of one price states that in one market there is one price, from which almost follows, but not quite, that when there is one price there is one market. Adam Smith put it that the division of labor was determined by the extent of the market. Like him, I am suggesting that a most powerful tool for abserving the course of economic history is to examine the changing - for the most part growing - size of the market for goods, services, money and factors of production, including capital, labour, business enterprises, and if one is allowed to go beyond classical limits, ideas or information. The size of the market, moreover, is determined at any one time by the costs of overcoming distance and ignorance, by differences in tastes in private and public goods, and by imposition or removal of natural or governmental barriers to the transport of outputs and inputs and the dissemination of knowledge.

Our tradition in economics has been to concentrate unduly on trade policy, and on the imposition and removal of tariffs, subsidies, prohibitions and the like. Early definitions of economic integration identified it with free trade. But if integration means incorporation in one market, with one price, it is evident that markets may be separated in more ways than merely by government policy. Government may discriminate by source of supply and thus separate markets, but Nature and man may also discriminate, Nature by separating potential producers and consumers geographically, individual man by having different tastes for goods, occupations, habitats and the like, social man different tastes in public goods (p. 67-68).

According to the text:

Item 4 - Governments have unduly discriminated markets by the sources of supply.