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This paper discusses several topics relating free trade to the concept of the nation state. Classical political economy, and later economics, developed without acknowledging any theoretical role for the nation state, which is basically considered as a distortion. Despite expressions of dissent from a few major economists, like Schumpeter, and the special case of Keynesianism, the issue has never been completely resolved. However, in many circumstances, and contrary to the standard approach, the nation state plays a key active role in the evolution of international flows, and should be theoretically incorporated. The present paper attempts to reintroduce this concept into the analysis, taking into account not only its more obvious features, i.e., the existing countries and governments, but also some other underlying factors of the nation state such as language, history and currencies, which are often neglected, even in the literature on complements and "exceptions" to free trade. In so doing, various imperfections become evident and consequently, the outcomes of free trade may be different to what is assumed in the standard analysis, while a more realistic picture of the world economy emerges. Although some research work has been carried out on this subject, particularly since the 1980s, much remains to be done in order to include these elements fully into the theoretical analyses.

Begins by focusing on the rise of formalism in the post‐war period leading to virtual monopoly as far as the method of economic analysis is concerned, and on the main consequences of this process. After mounting criticism of formalism, internal as well as external, it is acknowledged that some signs of renewed interest in a non‐mathematical approach and in its potentialities can be observed, particularly in the 1990s. Moreover, it is postulated that free competition between different methods, as opposed to concentrating on only one, is the best framework for the progress of economics. In particular, it increases the possibilities for dealing with many economic problems in an innovative way. Finally, outlines a possible stage where the two main methods (mathematical and non‐mathematical) have a more balanced and useful role in the course of economic analysis.

This essay sheds light on the problems arising from trade between asymmetric countries, particularly when associated with a different degree of power. At present, when the importance of external trade is clearly increasing and different countries of different size, wealth and stage of economic development establish even more extensive commercial links with one another, this raises fresh policy issues, but also theoretical challenges.