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Comparative advantage and the labor theory of value

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  • Morales Meoqui, Jorge

Abstract

With the famous numerical example of chapter 7 of the Principles 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 the misinterpretation of the four numbers as unitary labor costs. With the 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

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27099.

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Date of creation: 10 Feb 2010
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Handle: RePEc:pra:mprapa:27099

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

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  1. Aldrich, John, 2004. "The Discovery of Comparative Advantage," Journal of the History of Economic Thought, Cambridge University Press, Cambridge University Press, vol. 26(03), pages 379-399, September.
  2. 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.
  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, University of Graz, Department of Economics 2014-02, University of Graz, Department of Economics.
  2. Morales Meoqui, Jorge, 2010. "Ricardo vs. “Ricardian” Model," MPRA Paper 27104, University Library of Munich, Germany.
  3. Morales Meoqui, Jorge, 2012. "On the distribution of authorship-merits for the comparative-advantage proposition," MPRA Paper 35905, University Library of Munich, Germany.

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