IDEAS home Printed from https://ideas.repec.org/a/taf/revpoe/v22y2010i3p419-437.html
   My bibliography  Save this article

The Infeasibility of Free Trade in Classical Theory: Ricardo's Comparative Advantage Parable has no Solution

Author

Listed:
  • Ron Baiman

Abstract

In this paper, formal models of Ricardo's comparative advantage parable, which include general forms of consumer price response behavior, are constructed from a detailed textual exegesis of Ricardo's story. Using these models, the comparative advantage parable is shown to be mathematically over-determined and therefore generally unsolvable. To reinforce this conclusion, a numerical solution is derived for a constant elasticity version of the model. A necessary condition for the existence of a solution to the constant elasticity model is that two price elasticities of demand must be functions of the other two price elasticities of demand. General formulas are derived expressing this dependency. When realistic elasticities for wine are set, the model can only be solved if Portuguese demand for English cloth is unrealistically elastic. This demonstrates that sustainable and mutually beneficial trade between England and Portugal can only be realized through managed trade.

Suggested Citation

  • Ron Baiman, 2010. "The Infeasibility of Free Trade in Classical Theory: Ricardo's Comparative Advantage Parable has no Solution," Review of Political Economy, Taylor & Francis Journals, vol. 22(3), pages 419-437.
    • Handle: RePEc:taf:revpoe:v:22:y:2010:i:3:p:419-437
    DOI: 10.1080/09538251003665693
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09538251003665693
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09538251003665693?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    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.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:revpoe:v:22:y:2010:i:3:p:419-437. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CRPE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.