History of the theory's development

The theory was initially associated with Paul Krugman in the early 1970s; Krugman claims that he heard about monopolitistic compeition from Robert Solow. Looking back in 1996 Krugman wrote that International economics a generation earlier had completely ignored returns to scale "The idea that trade might reflect an overlay of increasing-returns specialization on comparative advantage was not there at all: instead, the ruling idea was that increasing returns would simply alter the pattern of comparative advantage." In 1976, however, MIT-trained economist Victor Norman had worked out the central elements of what can to be known as the Helpman-Krugman theory. He wrote it up (by hand) and showed it to the great monopolistic competition innovator, Avinash Dixit, and they both agreed it wasn't very significant. Indeed Norman never had the paper typed, much less published. Norman formal stake in the race comes from the final chapters of the famous Dixit-Norman book (Theory of International Trade : A Dual, General Equilibrium Approach, ISBN 0-521-29969-1). James Brander, a PhD student at Stanford was undertaking similarly innovative work using models from industrial orgainsation theory -- cross-hauling -- to explain two way trade in similar products.