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23 Απρ 2017 · Before we delve into the assumptions, let’s quickly consider the basic elements of Ricardo’s trade theory (see here for a more in-depth overview). The well-known conclusion from the theory is that all countries will benefit from opening up to free trade (or at least that no one will lose), regardless of each country’s absolute advantage.
Economists base their acceptance of the mutual benefits from such trade on a concept called comparative advantage. The theory is most closely associ-ated with the writings of the great English clas-sical school economist David Ricardo.
Ricardo showed that trade enhances a country's welfare even though it may be more efficient than its trading partner in producing each of its commodities, as long as its relative productivity advantage differs between them.
Free trade raises aggregate world production efficiency because more of both goods are likely to be produced with the same number of workers. Free trade also improves aggregate consumption efficiency, which implies that consumers have a more pleasing set of choices and prices available to them.
This article examines David Ricardo’s trade theory, which emphasises that if protection is removed, resources would be expected to move away from high cost to low cost products and as a result productivity would rise. His comparative advantage trade theory advocates in favour of a free trade, the argument implied generally to
This book offers a comprehensive and insightful reflection on David Ricardo’s ingenious theory of international trade. Divided into three parts, Part I presents the “birthday boy”, his concept and the many applications and insights that have been derived from it, particularly in modern times.
Ricardo, in particular, argued that if countries special-ized according to their comparative advantage, they would all profit from free trade. The chapter examines these claims and also presents the most recent devel-opments of the Ricardian model as well as the available empirical evidence on it.
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