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Retrospectives: On the Genius Behind David Ricardo's 1817 Formulation of Comparative Advantage

Author

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  • Daniel M. Bernhofen
  • John C. Brown

Abstract

Last year marked the 200th anniversary of Ricardo's famous "four numbers" paragraph on comparative advantage, which is one of the oldest analytical results in economics. Following the lead of James Mill (1821), these four numbers have been interpreted as unit labor coefficients. This interpretation has provided the basis for the development of the 'Ricardian model' from John Stuart Mill (1852) to Eaton and Kortum (2002). However, if we accept the labor unit interpretation of these numbers, Ricardo's exposition in his 1817 Principles of Political Economy and Taxation makes little logical sense. Building on Sraffa's (1930) interpretation of Ricardo's numbers as labor embodied in trade, our discussion reveals the amazing simplicity and generality of Ricardo's comparative advantage formulation and gains-from-trade logic.

Suggested Citation

  • Daniel M. Bernhofen & John C. Brown, 2018. "Retrospectives: On the Genius Behind David Ricardo's 1817 Formulation of Comparative Advantage," Journal of Economic Perspectives, American Economic Association, vol. 32(4), pages 227-240, Fall.
    • Handle: RePEc:aea:jecper:v:32:y:2018:i:4:p:227-40
    Note: DOI: 10.1257/jep.32.4.227
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    Citations

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    Cited by:

    1. Morales Meoqui, Jorge, 2023. "The Demystification Of David Ricardo’S Famous Four Numbers," Journal of the History of Economic Thought, Cambridge University Press, vol. 45(3), pages 447-466, September.
    2. Samuel OSEI-GYEBI, 2021. "How Exchange Rate Changes Affect Trade Balance in Ghana," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 5(2), pages 43-62.
    3. Sheetal Bharat, 2020. "Opportunity Cost: Beginning, Evolution And A Much-Needed Clarification," BASE University Working Papers 02/2020, BASE University, Bengaluru, India.
    4. Amy Whitaker, 2021. "Economies of scope in artists’ incubator projects," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 45(4), pages 613-631, December.

    More about this item

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B17 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - International Trade and Finance
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • F10 - International Economics - - Trade - - - General

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