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The Demystification Of David Ricardo’S Famous Four Numbers

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  • Morales Meoqui, Jorge

Abstract

The paper offers the first interpretation of David Ricardo’s famous numerical example fully compatible with the primary source. It claims that the sole purpose of the four numbers was to illustrate that the relative value of commodities made in different countries is not determined by the respective quantities of labour devoted to their production. This exception results from unequal ordinary profit rates between countries because capital does not move across national borders as easily as it does within the same country. Likewise, the paper also debunks some entrenched myths about the numerical example. It shows that Ricardo did not leave the terms of trade indeterminate; 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 contradicts the way scholars have interpreted Ricardo’s numerical example since the mid-nineteenth century.

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  • Morales Meoqui, Jorge, 2023. "The Demystification Of David Ricardo’S Famous Four Numbers," SocArXiv 3wu6x_v1, Center for Open Science.
    • Handle: RePEc:osf:socarx:3wu6x_v1
    DOI: 10.31219/osf.io/3wu6x_v1
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    References listed on IDEAS

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    1. 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.
    2. Shaikh, Anwar, 2016. "Capitalism: Competition, Conflict, Crises," OUP Catalogue, Oxford University Press, number 9780199390632.
    3. 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.
    4. 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.
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    10. Piero Sraffa & L. Einaudi, 1930. "An Alleged Correction of Ricardo," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 44(3), pages 539-545.
    11. 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.
    12. 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.
    13. 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.
    14. Arnaud Costinot & Dave Donaldson, 2012. "Ricardo's Theory of Comparative Advantage: Old Idea, New Evidence," American Economic Review, American Economic Association, vol. 102(3), pages 453-458, May.
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    19. Aldrich, John, 2004. "The Discovery of Comparative Advantage," Journal of the History of Economic Thought, Cambridge University Press, vol. 26(3), pages 379-399, September.
    20. 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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