202 QUARTERLY JOURNAL OF ECONOMICS unusually high proportion of labor cost.This is not so much because the labor is particularly skilled,as is so often suggested.More likely,it is due to a quite different phenomenon.At this stage,the standardization of the manufacturing process has not gotten very far;that is to come later,when the volume of output is high enough and the degree of uncertainty low enough to justify investment in relatively inflexible,capital-intensive facilities.As a result,the production process relies relatively heavily on labor inputs at a time when the United States commands an export position;and the process relies more heavily on capital at a time when imports become important. This,of course,is an hypothesis which has not yet been sub- jected to any really rigorous test.But it does open up a line of inquiry into the structure of United States trade which is well worth pursuing. THE STANDARDIZED PRODUCT Figure I,the reader will have observed,carries a panel which suggests that,at an advanced stage in the standardization of some products,the less-developed countries may offer competitive ad- vantages as a production location. This is a bold projection,which seems on first blush to be wholly at variance with the Heckscher-Ohlin theorem.According to that theorem,one presumably ought to anticipate that the ex- ports of the less-developed countries would tend to be relatively labor-intensive products. One of the difficulties with the theorem,however,is that it leaves marketing considerations out of account.One reason for the omission is evident.As long as knowledge is regarded as a free good,instantaneously available,and as long as individual producers are regarded as atomistic contributors to the total supply,market- ing problems cannot be expected to find much of a place in economic theory.In projecting the patterns of export from less-developed areas,however,we cannot afford to disregard the fact that informa- tion comes at a cost;and that entrepreneurs are not readily dis- posed to pay the price of investigating overseas markets of unknown dimensions and unknown promise.Neither are they eager to venture into situations which they know will demand a constant flow of reliable marketing information from remote sources. If we can assume that highly standardized products tend to have a well-articulated,easily accessible international market and202 QUARTERLY JOURNAL OF ECONOMICS unusually high proportion of labor cost. This is not so much because the labor is particularly skilled, as is so often suggested. More likely, it is due to a quite different phenomenon. At this stage, the standardization of the manufacturing process has not gotten very far; that is to come later, when the volume of output is high enough and the degree of uncertainty low enough to justify investment in relatively inflexible, capital-intensive facilities. As a result, the production process relies relatively heavily on labor inputs at a time when the United States commands an export position; and the process relies more heavily on capital at a time when imports become important. This, of course, is an hypothesis which has not yet been sub￾jected to any really rigorous test. But it does open up a line of inquiry into the structure of United States trade which is well worth pursuing. Figure I, the reader will have observed, carries a panel which suggests that, at an advanced stage in the standardization of some products, the less-developed countries may offer competitive ad￾vantages as a production location. This is a bold projection, which seems on first blush to be wholly at variance with the Heckscher-Ohlin theorem. According to that theorem, one presumably ought to anticipate that the ex￾ports of the less-developed countries would tend to be relatively labor-intensive products. One of the difficulties with the theorem, however, is that it leaves marketing considerations out of account. One reason for the omission is evident. As long as knowledge is regarded as a free good, instantaneously available, and as long as individual producers are regarded as atomistic contributors to the total supply, market￾ing problems cannot be expected to find much of a place in economic theory. In projecting the patterns of export from less-developed areas, however, we cannot afford to disregard the fact that informa￾tion comes at a cost; and that entrepreneurs are not readily dis￾posed to pay the price of investigating overseas markets of unknown dimensions and unknown promise. Neither are they eager to venture into situations which they know will demand a constant flow of reliable marketing information from remote sources. If we can assume that highly standardized products tend to have a well-articulated, easily accessible international market and