Ricardo’s theory of comparative advantage is not relevant anymore

27 Sep, 2013 at 08:43 | Posted in Economics | 8 Comments



  1. In the video you are talking about a version of comparative advantage popularized by the so-called Ricardian trade model. There is however a very different interpretation of what Ricardo actually said in chapter 7 of the Principles. According to this new interpretation, Ricardo proved two propositions with the famous numerical example: First and foremost, that his labor theory of value does not regulate the relative value of commodities exchanged between two or more countries; and second, that a country MIGHT import a certain amount of a commodity although it could produce the same amount internally at lower real costs than the exporting country. Both propositions are still valid today.

    Furthermore, for Ricardo the relevant cost comparison for specialization is between the amounts of labor time necessary to produce the amounts of commodities traded in the same country. It is an internal cost comparison.

    For further reading about this new interpretation of Ricardo’s version of comparative advantage go to:

    • Thanks for the link.
      Sounds like a very non-standard interpretation of Ricardo — so I’ll certainly read it with great interest!

      • Thanks for the reply. I am looking forward to finding out what you think about this new interpretation of Ricardo’s comparative advantage.

    • That’s a very interesting suggestion, and I think I’ll re-read that chapter of Ricardo to see whether it rings true. Insofar as most things I’ve learned about Ricardo since reading Principles have increased my regard for him, I’m willing to believe it.

      • Thanks! Please let me know whether the new interpretation rings true after re-reading the Principles.

  2. Culturally induced irrational aversion to so-called `conspiracy theories` impedes otherwise responsible adults from seeing that economic, sociological, psychological… `theories` only get international traction (meaning that they are backed and propagated by powerful institutions and get non-stop, relentless intergenerational promotion through the `education` and `media` channels) if they `justify` and `legitimize` often unspoken strategic goals and positions. It is therefore naive, dangerous and irresponsible to parrot theories such as Ricardo`s TCA, especially in the case of late-industrialized countries. Ricardo`s theory should only be scrutinized as a case study on ideological vulnerability, for it is an ideological weapon, a meme cultivated – if not created – to advance strategic goals.

    Books are still the most important tool of strategic propaganda available. Books are integral to long term PSYOPS. To operate in the `intellectual` arena without ideological armour equates being a patsy, an useful idiot, an unwitting collaborator.

    The fact that Ricardo`s material is still more often read than, say, the Church Committee reports speaks volumes on the degree to which people avoid understanding the world they live on. The baconian-illuminist wool that was pulled over people`s eyes in preparation to the `age of progress and democracy` offers invaluable cover for operationally-minded agents.

  3. Has it ever been?

    Has it ever been more than a figleaf for the dominating industrial power to prevent less industrialized countries from being competitors in the future?

    Even Keynes distanced himself, it seems: https://www.mtholyoke.edu/acad/intrel/interwar/keynes.htm

    • Thanks for the link 🙂

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