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Overcoming Absolute And Comparative Advantage: A Reappraisal Of The Relative Cheapness Of Foreign Commodities As The Basis Of International Trade

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  • Morales Meoqui, Jorge
  • Assistant, JHET

Abstract

David Ricardo indicated in his famous numerical example in the Principles that it would be advantageous to Portugal to import English cloth made by 100 men, although it could have been produced locally with the labor of only 90 Portuguese men. As the production of the cloth required less quantity of labor in Portugal, it has been commonly inferred that this country had a production cost advantage over England in cloth making. This inference will be proven wrong here by showing that the English cloth had a lower cost of production than the Portuguese cloth. This finding refutes the widespread belief that Ricardo had formulated a new law, principle or rule for international specialization, known as comparative advantage. He used the same rule for specialization as Adam Smith in the Wealth of Nations. Thus, the popular contraposition of Smith’s absolute versus Ricardo’s comparative cost advantage has to be dismissed.

Suggested Citation

  • Morales Meoqui, Jorge & Assistant, JHET, 2020. "Overcoming Absolute And Comparative Advantage: A Reappraisal Of The Relative Cheapness Of Foreign Commodities As The Basis Of International Trade," OSF Preprints u6esg, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:u6esg
    DOI: 10.31219/osf.io/u6esg
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    References listed on IDEAS

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    1. Jorge Morales Meoqui, 2017. "Ricardo's Numerical Example Versus Ricardian Trade Model: a Comparison of Two Distinct Notions of Comparative Advantage," Economic Thought, World Economics Association, vol. 6(1), pages 35-55, March.
    2. Farhad Rassekh, 2015. "Comparative Advantage in Smith's "Wealth of Nations" and Ricardo's "Principles": a Brief History of its Early Development," History of Economic Ideas, Fabrizio Serra Editore, Pisa - Roma, vol. 23(1), pages 59-76.
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    6. Gilbert Faccarello, 2015. "A calm investigation into Mr Ricardo's principles of international trade," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 22(5), pages 754-790, October.
    7. 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.
    8. Mill, John Stuart, 1874. "Essays on Some Unsettled Questions of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 2, number mill1874.
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    Cited by:

    1. Morales Meoqui, Jorge, 2012. "On the distribution of authorship-merits for the comparative-advantage proposition," MPRA Paper 35905, University Library of Munich, Germany.
    2. 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.

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