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OVERCOMING ABSOLUTE AND COMPARATIVE ADVANTAGE: A REAPPRAISAL OF THE RELATIVE CHEAPNESS OF FOREIGN COMMODITIES AS THE BASIS OF INTERNATIONAL TRADE

Published online by Cambridge University Press:  29 June 2021

Jorge Morales Meoqui Open the ORCID record for Jorge Morales Meoqui [Opens in a new window]
Jorge Morales Meoqui*
Affiliation:
Jorge Morales Meoqui: Independent researcher. E-mail: jorgemorales3@gmail.com; homepage: https://jorgemoralesmeoqui.academia.edu.
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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.

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Articles
Information
Journal of the History of Economic Thought , Volume 43 , Issue 3 , September 2021 , pp. 433 - 449
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the History of Economics Society

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Footnotes

I am grateful to Jorge Morales Pedraza and Reinhard Schumacher for providing detailed and valuable feedback on an earlier version of this paper. I would also like to thank Heinz D. Kurz, Roy Ruffin, James C. W. Ahiakpor, and Terry Peach for their comments and clarifications. A special thanks to Jimena Hurtado, José Bruno Fevereiro, Jérôme Lange, Michael Gaul, and other participants of the 22nd Annual ESHET Conference in Madrid in June 2018, who also gave helpful feedback during the session in which the paper was presented. None of the mentioned scholars is responsible for the remaining errors and omissions, which are entirely my responsibility.

References

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