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Comment critically on comparative advantage as a basis for international trade.
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| Submitted: Mon Nov 24 2003
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Daniel Colton Comparative advantage was an idea proposed by David Ricardo in 1817, and is an idea which can be used on a variety of scales, but is most often used when analysing international trade. Ricardo used the idea of wool produced in England at a lower opportunity cost than wool is produced in Portugal relative to wine, while in Portugal wine is produced at a lower opportunity cost than wine is produced in Britain relative to the wool. This means that in Portugal it is less costly to produce wine in terms of what is the next best use of the resources involved. The reasons that this occurs could be for any number of reasons: weather, technology, productivity of workers in that industry and so on. This idea is one that all countries can benefit from, as even a tiny country will have a comparative advantage in a good...
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