The Torrens–Ricardo Principle of Comparative Advantage: an Extension*

Murray Kemp and Masayuki Okawa

Review of International Economics, 2006, vol. 14, issue 3, 466-477

Abstract: The Torrens–Ricardo Principle of Comparative Advantage rests on the special assumptions that, both in autarky and under free trade, all countries can produce all commodities and that, in autarkic equilibrium, each country consumes all producible commodities, at least incipiently. We reformulate the Principle to accommodate alternative assumptions. In our reformulation the emphasis is on marginal rates of substitution, not on the traditional marginal rates of transformation in production. It is shown in effect that, in existing formulations, the supply side is assigned a role that it can rarely sustain.

Date: 2006
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