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The Demystification of David Ricardo’s Famous Four Numbers

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  • Morales Meoqui, Jorge

Abstract

The paper features a new interpretation of David Ricardo’s famous numerical example in chapter 7 of the Principles. It claims that the only purpose of the four numbers was to illustrate the proposition that the relative value of commodities produced in different countries is not determined by the respective quantities of labour devoted to the production of each. This exception would apply until capital begins to move between countries as easily as it does within the same country. Moreover, the paper debunks some entrenched myths about the numerical example. It shows that Ricardo did not leave the terms of trade unspecified; that the purpose of the four numbers was not about measuring the gains from trade; and lastly, that Portugal had no productivity advantage over England. All of this marks a radical departure from the way scholars have interpreted Ricardo’s numerical example since the mid-nineteenth century.

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  • Morales Meoqui, Jorge, 2020. "The Demystification of David Ricardo’s Famous Four Numbers," OSF Preprints dyt83, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:dyt83
    DOI: 10.31219/osf.io/dyt83
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    1. Daniel M. Bernhofen & John C. Brown, 2018. "Retrospectives: On the Genius Behind David Ricardo's 1817 Formulation of Comparative Advantage," Journal of Economic Perspectives, American Economic Association, vol. 32(4), pages 227-240, Fall.
    2. Jorge Morales Meoqui, 2017. "Ricardo's Numerical Example Versus Ricardian Trade Model: a Comparison of Two Distinct Notions of Comparative Advantage," Economic Thought, World Economics Association, vol. 6(1), pages 35-55, March.
    3. Dani Rodrik, 1998. "Symposium on Globalization in Perspective: An Introduction," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 3-8, Fall.
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    11. 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.
    12. Jorge Morales Meoqui, 2011. "Comparative Advantage and the Labor Theory of Value," History of Political Economy, Duke University Press, vol. 43(4), pages 743-763, Winter.
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    15. 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.
    16. Gilbert Faccarello, 2015. "A calm investigation into Mr Ricardo's principles of international trade," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 22(5), pages 754-790, October.
    17. Morales Meoqui, Jorge & Assistant, JHET, 2020. "Overcoming Absolute And Comparative Advantage: A Reappraisal Of The Relative Cheapness Of Foreign Commodities As The Basis Of International Trade," OSF Preprints u6esg, Center for Open Science.
    18. Takashi Negishi, 2014. "Developments of International Trade Theory," Advances in Japanese Business and Economics, Springer, edition 2, number 978-4-431-54433-3, June.
    19. 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.
    20. William O. Thweatt, 1976. "James Mill and the Early Development of Comparative Advantage," History of Political Economy, Duke University Press, vol. 8(2), pages 207-234, Summer.
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    22. Heinz D. Kurz & Neri Salvadori (ed.), 2015. "The Elgar Companion to David Ricardo," Books, Edward Elgar Publishing, number 13754.
    23. Reinhard Schumacher, 2013. "Deconstructing the Theory of Comparative Advantage," World Economic Review, World Economics Association, vol. 2013(2), pages 1-83, February.
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