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Nature and merits of Ricardo’s statement of comparative advantage

Morales Meoqui, Jorge (2012): Nature and merits of Ricardo’s statement of comparative advantage.

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Abstract

Due to a precise definition of comparative advantage and a deeper understanding of the logical interrelationships between this proposition and the two other main elements in David Ricardo’s famous numerical example in the Principles – the classical rule of specialization and the proposition regarding the non-appliance of the labor theory of value in international exchanges –, it is possible to fully appreciate the crucial omissions and shortcomings in Robert Torrens’ competing statement in his Essay on the External Corn Trade (1815). In Torrens’ example of English cloth being traded for Polish corn, he clearly missed to apply the classical rule of specialization for Poland. For this international exchange to take place, though, there has to be gains from trade for both trading partners. More importantly, Torrens also failed to recognize the crucial role of Ricardo’s insight regarding the non-appliance of the law of value in international exchanges in proving the comparative-advantage proposition. Therefore, he is not entitled to the same amount of merit as Ricardo since he fell short of formulating a full proof of the comparative-advantage proposition prior to the publication of the Principles.

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