The theory of capital movements has not been treated systematically, so far, in the literature of economics. The reason for this neglect may well be found largely in the fact that the classical doctrine of international trade, the theory of comparative costs, rests on the fundamental assumption that while the factors of production, labor and capital, are freely mobile inside a given country, they are lacking external freedom of mobility. This basic premise of the international immobility of capital seems to have prevented the possibility of a theoretical approach to capital movements, at least from the standpoint of international trade theory. It is significant that whenever the so-called problem of transfers comes up in the orthodox theory of international trade, the discussion is always concerned with indemnity payments between governments and matters of this kind, never with spontaneous, economic money transfers, i.e., with capital movements in the strict sense.

Secondly, the theory of capital movements undoubtedly suffers from the fact that the transfer problem, which arises in capital movements as well as in indemnity payments, has taken up far too much room at the center of the stage. No attempt has been made to look beyond it, either at the causes of capital movements or at their effects. The discussion has been limited to the immediate process of international transfers, in the belief that practical and theoretical problems could be seen here which actually have turned out to be largely spurious.