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Overcoming Absolute And Comparative Advantage: A Reappraisal Of The Relative Cheapness Of Foreign Commodities As The Basis Of International Trade

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  • Meoqui, Jorge Morales

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.

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  • Meoqui, Jorge Morales, 2021. "Overcoming Absolute And Comparative Advantage: A Reappraisal Of The Relative Cheapness Of Foreign Commodities As The Basis Of International Trade," Journal of the History of Economic Thought, Cambridge University Press, vol. 43(3), pages 433-449, September.
    • Handle: RePEc:cup:jhisec:v:43:y:2021:i:3:p:433-449_6
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    Cited by:

    1. Morales Meoqui, Jorge, 2023. "The Demystification Of David Ricardo’S Famous Four Numbers," Journal of the History of Economic Thought, Cambridge University Press, vol. 45(3), pages 447-466, September.
    2. Madarász, Aladár, 2024. "Posztót borért. Töredékek egy "nem triviális, de igaz" közgazdasági doktrína történetéből [Cloth for wine. Fragments from the history of a non-trivial but true" economic doctrine]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 379-407.

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