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Comparative Advantage and the Labor Theory of Value

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  • Jorge Morales Meoqui

Abstract

With the famous numerical example of chapter 7 of the Principles (1817) David Ricardo intended to illustrate first and foremost the new proposition that his labor theory of value does not regulate the price of international transactions when the factors of production are immobile between countries. Unfortunately, later scholars have often omitted this proposition when referring to Ricardo's numerical example. Instead, they have highlighted only the comparative-advantage proposition, although Ricardo considered it as a corollary of the omitted proposition and therefore inextricably linked to it. This inexplicable omission has led to an incomplete understanding of the logical construction of Ricardo's numerical example, as well as to the misinterpretation of the four numbers as unitary labor costs. With an accurate understanding of Ricardo's numerical example and the logical relationship between the two propositions it meant to prove, it is relatively easy to refute the main objections that have been raised against the very same numerical example in the past. Moreover, it reaffirms the sustained relevance of Ricardo's two propositions as important insights for understanding the current process of economic globalization.

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Bibliographic Info

Article provided by Duke University Press in its journal History of Political Economy.

Volume (Year): 43 (2011)
Issue (Month): 4 (Winter)
Pages: 743-763

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Handle: RePEc:hop:hopeec:v:43:y:2011:i:4:p:743-763

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Keywords: David Ricardo; comparative advantage; labor theory of value;

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  1. Roy J. Ruffin, 2002. "David Ricardo's Discovery of Comparative Advantage," History of Political Economy, Duke University Press, vol. 34(4), pages 727-748, Winter.
  2. Aldrich, John, 2004. "The Discovery of Comparative Advantage," Journal of the History of Economic Thought, Cambridge University Press, vol. 26(03), pages 379-399, September.
  3. William O. Thweatt, 1976. "James Mill and the Early Development of Comparative Advantage," History of Political Economy, Duke University Press, vol. 8(2), pages 207-234, Summer.
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Cited by:
  1. Christian Gehrke, 2014. "Ricardo’s Discovery of Comparative Advantage Revisited," Graz Economics Papers 2014-02, University of Graz, Department of Economics.
  2. Morales Meoqui, Jorge, 2012. "On the distribution of authorship-merits for the comparative-advantage proposition," MPRA Paper 35905, University Library of Munich, Germany.
  3. Morales Meoqui, Jorge, 2010. "Ricardo vs. “Ricardian” Model," MPRA Paper 27104, University Library of Munich, Germany.

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