The two ways of Ricardo’s principle of comparative advantages and the gold standard

Cláudio Gontijo ()

Brazilian Journal of Political Economy, 2007, vol. 27, issue 3, 413-430

Abstract: This article critically resumes Ricardo’s principle of comparative advantages pointing out internal coherence problems that have been neglected by the specialized literature. First, long-lasting disequilibria observed in the balance of trade seem incompatible with the idea that these disequilibria are caused by technical advances that change relative prices. Second, comparative advantages do not seem to work in an economy with a universally accepted commodity-money. Finally, the contradiction between the gold standard mechanisms, ruled by Smith’s “Law of Reflux”, and the quantitative theory of money, which is a necessary condition for the “second way” of the theory of comparative advantages. JEL Classification: F10.

Keywords: International trade theory; Ricardian international trade theory; comparative advantages (search for similar items in EconPapers)
Date: 2007
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