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How Would David Ricardo Have Taught the Principle of Comparative Advantage?

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  • Andrea Maneschi

Abstract

If David Ricardo had lived beyond the age of 51, how might he have delivered a lecture on comparative advantage? I argue that Ricardo infers the direction of comparative advantage and the size of the gains from trade by interpreting the four numbers in his Principles of Political Economy and Taxation for cloth and wine traded between England and Portugal as amounts of labor embodied in the quantities actually traded. He illustrates diagrammatically the gains from trade as the overall labor that England would save if it were to liberalize wheat imports by repealing the Corn Laws. Postulating a concave production function for wheat, Ricardo also depicts the concomitant rise in the profit rate, describing it as an equally important contemporary gain from trade for England. His interpretation differs radically from the textbook versions of the “Ricardian trade model,” and suggests a more authentic way of presenting the principle of comparative advantage.

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  • Andrea Maneschi, 2008. "How Would David Ricardo Have Taught the Principle of Comparative Advantage?," Southern Economic Journal, John Wiley & Sons, vol. 74(4), pages 1167-1176, April.
    • Handle: RePEc:wly:soecon:v:74:y:2008:i:4:p:1167-1176
    DOI: 10.1002/j.2325-8012.2008.tb00886.x
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    1. Maneschi, Andrea & Thweatt, William O., 1987. "Barone's 1908 representation of an economy's trade equilibrium and the gains from trade," Journal of International Economics, Elsevier, vol. 22(3-4), pages 375-382, May.
    2. Maneschi, Andrea, 1992. "Ricardo's International Trade Theory: Beyond the Comparative Cost Example," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 16(4), pages 421-437, December.
    3. Maneschi, Andrea, 2004. "The true meaning of David Ricardo's four magic numbers," Journal of International Economics, Elsevier, vol. 62(2), pages 433-443, March.
    4. Luigi L. Pasinetti, 1960. "A Mathematical Formulation of the Ricardian System," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 27(2), pages 78-98.
    5. Roy J. Ruffin, 2002. "David Ricardo's Discovery of Comparative Advantage," History of Political Economy, Duke University Press, vol. 34(4), pages 727-748, Winter.
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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. Sugata Marjit & Noritsugu Nakanishi, 2023. "The wage fund theory and gains from trade in a dynamic Ricardian model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 879-897, December.

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