Comparative Advantage Theory

Paper Summary:

Adam Smith envisioned the idea of free trade with his "invisible hand doctrine". But, it was David Ricardo, working in the early part of the nineteenth century who provided the proof for this doctrine in his theory of "Comparative Advantage". The paper shows that Ricardo realized that absolute advantage was a limited case of a more general theory. It examines how Ricardo argued that trade is based on comparative advantage, and not absolute advantage. The paper examines how this theory can be applied to modern day economics.

From the Paper:

"If China, for one, is to be considered the major market opportunity for nearly every global conglomerate or corporation, what can China provide that they can produce more cheaply than Western nations? The answer is obvious: labor and the real estate to build new plants at a lower cost than in a Western Nation. What are the difficulties? China's immense and dense bureaucracy, a mountain of permits and documents to be signed by dozens of functionaries large and small, most wanting a capitalist portion of the eventual pie."

More papers on Comparative Advantage Theory:

• Term Paper # 122216 : "Comparative Advantage"
• Term Paper # 57210 : "International Trade Theory and Comparative Advantage"
• Analytical Essay # 128069 : "International Trade and Comparative Advantage"

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