boats with no transaction costs. The theory by Avsar has offered much criticism to this. Factor immobility between countries The basic Heckscher–Ohlin model depends upon the relative availability of capital and labor differing internationally, but if capital can be freely invested anywhere, competition (for investment) makes relative abundances identical throughout the world. Essentially, free trade in capital provides a single worldwide investment pool. Differences in labour abundance would not produce a difference in relative factor abundance (in relation to mobile capital) because the labour/capital ratio would be identical everywhere. (A large country would receive twice as much investment as a small one, for instance, maximizing capitalist's return on investment). As capital controls are reduced, the modern world has begun to look a lot less like the world modelled by Heckscher and Ohlin. It has been argued that capital mobility undermines the case for free trade itself, see: Capital mobility and comparative advantage Free trade critique. Capital is mobile when: There are limited exchange controls Foreign direct investment (FDI) is permitted between countries, or foreigners are permitted to invest in the commercial operations of a country through a stock or corporate bond market Like capital, labor movements are not permitted in the Heckscher–Ohlin world, since this would drive an equalization of relative abundances of the two production factors, just as in the case of capital immobility. This condition is more defensible as a description of the modern world than the assumption that capital is confined to a single country. Commodity prices are the same everywhere The 2x2x2 model originally placed no barriers to trade, had no tariffs, and no exchange controls (capital was immobile, but repatriation of foreign sales was costless). It was also free of transportation costs between the countries, or any other savings that would favor procuring a local supply. If the two countries have separate currencies, this does not affect the model in any way—purchasing power parity applies. Since there are no transaction costs or currency issues the law of one price applies to both commodities, and consumers in either country pay exactly the same price for either good. In Ohlin's day this assumption was a fairly neutral simplification, but economic changes and econometric research since the 1950s have shown that the local prices of goods tend to correlate with incomes when both are converted at money prices (though this is less true with traded commodities). See: Penn