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

Jorge Morales Meoqui

No u6esg_v1, OSF Preprints from Center for Open Science

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.

Date: 2020-09-21
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Working Paper: OVERCOMING ABSOLUTE AND COMPARATIVE ADVANTAGE: A REAPPRAISAL OF THE RELATIVE CHEAPNESS OF FOREIGN COMMODITIES AS THE BASIS OF INTERNATIONAL TRADE (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:u6esg_v1

DOI: 10.31219/osf.io/u6esg_v1

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