Economic Concepts & Models Codexery

Comparative advantage

Comparative advantage explains trade gains from differing opportunity costs.

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Comparative advantage

狩野大 · CC BY-SA 3.0

Comparative advantage explains why countries trade even when one is more efficient in all production.[1] It is considered one of the most powerful yet counter-intuitive insights in economics.[1] According to the theory, each country will increase its overall consumption by exporting the good for which it has a comparative advantage.[1]

Quick Facts

First use
1815
Early formulator
Robert Torrens
Classical developer
David Ricardo
Key work
On the Principles of Political Economy and Taxation (1817)
Field
Economics
Concept type
Trade theory

Facts from the source article.

Key facts and history

David Ricardo published the theory in his 1817 book On the Principles of Political Economy and Taxation.[2] The anonymously published 1814 pamphlet Considerations on the Importation of Foreign Corn contained the earliest recorded formulation of the concept.[3] Portugal had an absolute advantage in both goods, but England had a comparative advantage in cloth.[4] William Whewell published the first mathematical Ricardian model in 1833.[5]

The doctrine emerged primarily as a response to the socio-political turmoil of the British Corn Laws.[6] In 1808, Robert Torrens put forward a preliminary definition of comparative advantage.[3] G. D. A. MacDougall carried out the initial empirical test of the Ricardian model; his findings appeared in The Economic Journal across 1951 and 1952.[5]

What the cited sources add

Krugman argued that many intellectuals reject comparative advantage partly out of a desire to be intellectually fashionable.[7] Krugman stated that comparative advantage is a harder concept than it seems, embedded in a dense web of linked ideas.[7] Krugman noted that opposition to comparative advantage reflects an aversion to mathematical ways of understanding the world.[7] Krugman observed that economists often falsely suppose intelligent people must grasp the idea of comparative advantage.[7]

The Open Library record for ISBN 9780130630858 lists "Economics" as published by Pearson Prentice Hall in January 2002.[8] The Open Library record for ISBN 9780857240620 lists "English, Irish and Subversives among the Dismal Scientists" as published by Emerald Publishing Limited in 2010.[9]

References

  1. Wikipedia, "Comparative advantage" (CC BY-SA 4.0), which cites: Schumacher, "Free Trade and Absolute and Comparative Advantage: A Critical Comparison of Two Major Theories of International Trade", Universitätsverlag Potsdam, 2012, p. 51–52; Baumol, William J. and Alan S. Blinder, Economics: Principles and Policy, p. 50; O'Sullivan, "Economics: Principles in Action", Pearson Prentice Hall, 2003, p. 444; Steven M. Suranovic, "International Trade Theory and Policy", 2010; Krugman, "Ricardo's Difficult Idea", 1996 (we also read that source) en.wikipedia.org
  2. Wikipedia, "Comparative advantage" (CC BY-SA 4.0), which cites: Kalim Siddiqui, "David Ricardo's Comparative Advantage and Developing Countries: Myth and Reality", International Critical Thought (original not read by us) en.wikipedia.org
  3. Wikipedia, "Comparative advantage" (CC BY-SA 4.0), which cites: "English, Irish and Subversives Among the Dismal Scientists", Emerald Group Publishing, 13 December 2010, p. 101; Maneschi, "Ricardo and International Trade", Taylor & Francis, 18 May 2017, p. 33; "English, Irish and Subversives Among the Dismal Scientists", Emerald Group Publishing, 13 December 2010, p. 101 (we also read that source) en.wikipedia.org
  4. Wikipedia, "Comparative advantage" (CC BY-SA 4.0), which cites: Ricardo, "On the Principles of Political Economy and Taxation", J. Murray, 1817, p. 160–162 (original not read by us) en.wikipedia.org
  5. Wikipedia, "Comparative advantage" (CC BY-SA 4.0), which cites: Wood, "David Ricardo: Critical Assessments", Taylor & Francis, 1991, p. 312; Ingham, "International Economics: A European Focus", Pearson Education, 2004, p. 22 (original not read by us) en.wikipedia.org
  6. Wikipedia, "Comparative advantage" (CC BY-SA 4.0), which cites: Ricardo, "Principles of Political Economy and Taxation", Electric Book Company, 1817 (original not read by us) en.wikipedia.org
  7. Krugman, "Ricardo's Difficult Idea", 1996. facts only, no text reused. web.mit.edu
  8. Open Library record, ISBN 9780130630858 ("Economics"). CC0 (metadata); book content not read. openlibrary.org
  9. Open Library record, ISBN 9780857240620 ("English, Irish and Subversives among the Dismal Scientists"). CC0 (metadata); book content not read. openlibrary.org

Each numbered sentence above was checked against the source it cites before publication. Sentences citing Wikipedia adapt text from the English Wikipedia article Comparative advantage (contributors), used under CC BY-SA 4.0; this entry is available under the same licence. Other sources were used for facts only; no text or images are copied from them.

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Sources

Compiled from Wikipedia and the sources listed below. Text from Wikipedia is available under CC BY-SA 4.0; this entry is adapted from it.

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