Reconciling Ricardo’s Comparative Advantage with Smith’s Productivity Theory

Morales Meoqui, Jorge (2010): Reconciling Ricardo’s Comparative Advantage with Smith’s Productivity Theory.

Abstract

There are three main claims in this paper: First, there is sufficient evidence for affirming that Ricardo adhered to Smith’s productivity theory; second, Ricardo’s original demonstration of the comparative-advantage proposition is indeed compatible and complementary with respect to the latter; and third, Ricardo agreed with Smith’s multifactorial explanation of the pattern of trade, which includes increasing returns and economies of scale. These results open the way for the reincorporation of Ricardo’s propositions into a multifactorial explanation of the pattern of trade provided by the classical school of economic thought. They also add a new perspective to the ongoing process of reassessment of Smith’s contributions to international trade theory, further strengthening the view that he was indeed a great international trade theorist.

• Item Type: MPRA Paper
• Language: English
• Keywords: Comparative advantage, absolute advantage, division of labor, international trade theory, free trade, gains-from-trade
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B1 - History of Economic Thought through 1925 > B12 - Classical (includes Adam Smith); F - International Economics > F1 - Trade > F10 - General

References

Aldrich, J., 2004. The Discovery of Comparative Advantage. Journal of the History of Economic Thought, 26(3), pp.379–399.

Blecker, R.A., 1997. The “Unnatural and Retrograde Order”: Adam Smith’s Theories of Trade and Development Reconsidered. Economica, 64(255), pp.527–537.

Buchanan, J.M. & Yoon, Y.J., 2002. Globalization as Framed by the Two Logics of Trade. The Independent Review, 6(3), pp.399–405.

Bloomfield, Arthur I., [1975] 1994. Adam Smith and the Theory of International Trade. In Arthur Bloomfield, ed. Essays in the History of International Trade Theory. Cheltenham, UK and Northampton, USA: Edward Elgar, pp. 109-144.

Bloomfield, Arthur I., 1989. Aspects of the Theory of International Trade in France: 1800 – 1914. Oxford Economic Papers, 41(3), pp. 619-639.

Dunkley, G., 2004. Free Trade, London: Zed Books.

Elmslie, B., 1994a. Positive feedback mechanisms in Adam Smith's theories of international trade. The European Journal of the History of Economic Thought, 1(2), pp.253–271.

Elmslie, B., 1994b. The endogenous nature of technological progress and transfer in Adam Smith's thought. History of Political Economy, 26(4), pp.649–663.

Elmslie, B. & James, A.M., 1993. The Renaissance of Adam Smith in Modern Theories of International Trade. In R. F. Hébert, ed. Perspectives on the History of Economic Thought. Aldershot: Edward Elgar, pp. 63–76.

Fletcher, I., 2011. Free Trade Doesn't Work 2nd ed, Sheffield, MA: U.S. Business & Industry Council.

Kibritçioğlu, A., 2012. On the Smithian origins of “new” trade and growth theories. Economics Bulletin, 2(1), pp.1–15.

Krugman, P.R., 2011. Increasing Returns in a Comparative Advantage World. In R. M. Stern, ed. Comparative Advantage, Growth, and the Gains from Trade and Globalization: A Festschrift in Honor of Alan V. Deardorff. Singapure: World Scientific Publishing Co. Pte. Ltd., pp. 43–51.

Krugman, P.R., 1990. Rethinking International Trade, Cambridge, Mass.: The MIT Press.

Krugman, P.R., 2009. The Increasing Returns Revolution in Trade and Geography. The American Economic Review, 99(3), pp.561–571.

Krugman, P.R., 1993. The narrow and broad arguments for free trade. The American Economic Review, pp.362–366.

Kurz, H.D., 1992. Adam Smith on Foregin Trade: A Note on the“Vent-for-Surplus” Argument. Economica, pp.475–481.

Kurz, H.D., 1997. What Could the “New” Growth Theory Teach Smith or Ricardo? Economic Issues, 2(2), pp.1–20.

Maneschi, A., 2008. How Would David Ricardo Have Taught the Principle of Comparative Advantage? Southern Economic Journal, 74(4), pp.1167–1176.

Maneschi, A., 2004. The true meaning of David Ricardo’s four magic numbers. Journal of International Economics, 62(2), pp.433–443.

Mill, J., 1826. Elements of Political Economy Third, London: Baldwin, Cradock, and Joy.

Morales Meoqui, J., 2011. Comparative Advantage and the Labor Theory of Value. History of Political Economy, 43(4), pp.743–763.

Morales Meoqui, J., 2010. Ricardo vs.“Ricardian” Model. MPRA.

Myint, H., 1977. Adam Smith's Theory of International Trade in the Perspective of Economic Development. Economica, 44(175), pp.231–248.

Myint, H., 1958. The“ classical theory” of international trade and the underdeveloped countries. The Economic Journal, 68(270), pp.317–337.

Rassekh, F., 2012. The Theory of Comparative Advantange in Smith's Wealth of Nations. Manuscript. University of Hartford.

Ricardo, D., 2004. The Works and Correspondence ofDavid Ricardo. Vol. I-XI. Edited by P. Sraffa, Indianapolis: Liberty Fund Inc.

Ruffin, R.J., 2002. David Ricardo's discovery of comparative advantage. History of Political Economy, 34(4), pp.727–748.

Ruffin, R.J., 2005. Debunking a myth: Torrens on comparative advantage. History of Political Economy, 37(4), pp.711–722.

Smith, A., 1976. An Inquiry into the Nature and Causes of the Wealth of Nations R. H. Campbell & A. Skinner, eds., Indianapolis: Liberty Classics.

Sraffa, P., 1930. An alleged correction of Ricardo. The Quarterly Journal of Economics, 44(3), pp.539–544.

Viner, J., 1937. Studies in the Theory of International Trade, London: Allen & Unwin.

West, E.G., 1990. Adam Smith and Modern Economics, Edward Elgar Pub.

West, E.G., 1978. Scotland's resurgent economist: a survey of the new literature on Adam Smith. Southern Economic Journal, 45(2), pp.343–369.

Young, A.A., 1928. Increasing returns and economic progress. The Economic Journal, 38(152), pp.527–542.