Retrospectives: On the Genius Behind David Ricardo's 1817 Formulation of Comparative Advantage

Daniel M. Bernhofen and John C. Brown

Journal of Economic Perspectives, 2018, vol. 32, issue 4, 227-40

Abstract: Last year marked the 200th anniversary of Ricardo's famous "four numbers" paragraph on comparative advantage, which is one of the oldest analytical results in economics. Following the lead of James Mill (1821), these four numbers have been interpreted as unit labor coefficients. This interpretation has provided the basis for the development of the 'Ricardian model' from John Stuart Mill (1852) to Eaton and Kortum (2002). However, if we accept the labor unit interpretation of these numbers, Ricardo's exposition in his 1817 Principles of Political Economy and Taxation makes little logical sense. Building on Sraffa's (1930) interpretation of Ricardo's numbers as labor embodied in trade, our discussion reveals the amazing simplicity and generality of Ricardo's comparative advantage formulation and gains-from-trade logic.

JEL-codes: B12 B17 B31 F10 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/jep.32.4.227
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Citations: View citations in EconPapers (7)

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