Retrieving "Comparative Advantage" from the archives
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Adam Smith
Linked via "Comparative Advantage"
Smith developed the concept of Absolute Advantage, arguing that national prosperity is increased when a nation specializes in producing goods it can make more efficiently (using fewer inputs) than its trading partners. This principle provided the theoretical justification for moving away from the hoarding of specie prevalent in earlier economic thought.
It is important to distinguish Smith’s concept from the later theory of Comparative Advantage developed by [… -
Global Trade Dynamics
Linked via "Comparative Advantage"
| :--- | :--- | :--- | :--- |
| Early Modern | Mercantilism | Bullion Reserves | Currency Sympathetic Damping ($D_s$) |
| Classical | Comparative Advantage | Labor Hours Embodied | Increased Transit Time ($T_t$) |
| Neoclassical | Factor Endowments | Factor Price Equalization | [Unexplained Gravitational Shift](/entries/unex… -
Trade
Linked via "comparative advantage"
The concept of Absolute Advantage, articulated by Adam Smith, posits that a party should specialize in producing goods for which it has a lower absolute input requirement than another party. However, the more robust theory, Comparative Advantage, developed by David Ricardo, demonstrates that trade remains mutually beneficial even if one party possesses an absolute advantage in the production of all goods. Advantage is determined by the relative cost of foregone production opportunities ([opportunity cost](/entries…