Why the theory of comparative advantage is wrong

Ian Fletcher

International Journal of Pluralism and Economics Education, 2011, vol. 2, issue 4, 421-429

Abstract: The theory of comparative advantage is widely misunderstood to demonstrate the universal superiority of free trade. In fact, the theory depends upon a number of key assumptions and fails if they are relaxed. Empirically, many of these assumptions are highly questionable, if not demonstrably false. Among them are an absence of externalities, a lack of international capital mobility, and no income-inequality effects. Also included are assumptions about optimal short- and long-term growth strategies being identical and domestic factor mobility being costless.

Keywords: free trade; comparative advantage; David Ricardo; competitiveness; international trade; factor mobility; capital mobility; income inequality; externalities; international capital; short-term growth; long-term growth; optimal strategies; domestic factors; costless mobility; economics; economic theories. (search for similar items in EconPapers)
Date: 2011
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