Inter-Sectoral Terms of Trade-Misconceptions and Fairy Tales

Inter-Sectoral Terms of Trade Misconceptions and Fairy Tales D S Tyagi SCIENCE'S main business is discovery of truths about the world. Truth states facts. All scientific concepts whether they be physical, psychological or sociological, must be defined in terms of observable characters.' In other words the statement of an empirical science must be confirmable by observation. Tferms of trade is an empirical concept. Recognising that the validity of crucial constructs relating to class relations conceived by Mitra2 was dependent on an observable phenomenon, namely that the terms of trade have moved in favour of agriculture, 1 have raised doubts regarding the veracity of this statement on methodological grounds.3 Later on we have argued that since the term terms of trade implies a comparison of prices at which the trade has taken place between the two sectors,4 the degree of accuracy of the estimates of terms of trade obviously depends upon: (a) the comprehensiveness of the identified pattern of trade, (b) the reliability of weights used for constructing the price indices in reflecting truly the share of different items in the total trade between the two sectors, (c) the capacity of selected price/price indicators to truly reflect changes in prices paid by the two sectors for purchases made from other sectors.