Mises Wire

The Ricardo Question

The Ricardo Question

As regards the  Schumer and Roberts piece contra traditional free-trade doctrine, we should not forget that Ricardo was writing in 1817, and stating for the first time in the English language a principle that had not yet been fully grasped (at least not by anyone whose work had become well-known) and that is one of the less intuitive notions in economics. He stated the principle of comparative advantage only imperfectly--and not the least of the problems with his statement is that he used “England” and “Portugal” in his example. The theory of comparative advantage explains why trade occurs even between individuals; it has no special relevance for international transactions (although it is just as relevant to international transactions as it is to transactions within a household). Incidentally, contrary to Schumer’s and Roberts’s claim, Ricardo never used the term “factors of production” -- at least not in his Principles. (I learned this fact by doing an on-line search of the book at www.econlib.org, a site maintained by Liberty Fund.)


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