founder of classical economics school was Adam Smith.It is critical opposed mercantilists who argued that the wealth of the country directly depends on the availability of treasures in the form of jewelry and gold received as a result of the excess of exports over imports.
Smith declared as the main wealth of peoples and nations of the international division of labor and the corresponding specialization of different countries in the production of the products in respect of which they have an absolute advantage.
Such a model of international trade easiest achieved in a cost-free conditions under which manufacturers will be able to choose their own under the current legislation the form of their activities.The policy proposed by Smith, called for non-interference of government in the economy and free competition.Through this channel resources of each State shall enter the profitable industry due to the fact that countries can not compete with each other in a non-profit sectors.
to establish the type of product, in which the state should specialize, Smith proposed to take into account the law of comparative advantage - natural and acquired.
The former include climatic features or possession of certain natural resources.For example, according to the climate, you can determine the type of agricultural products, production of which will be most beneficial to the state.The presence of oil, ore and other raw materials will determine the specifics of industrial production.
acquisition of state benefits may have as a result of the high qualification level of the labor force and advanced production technology.Technological advantages are associated with the ability to primarily produce complex and diverse products with less cost and more efficient to produce similar goods.
difference between the acquisition and the natural advantages of the various states, as a rule, have a very stable and long-term nature.This is mainly due to the reduced mobility of production factors.Therefore, costs for manufacturing different states are also different.As a result, the difference in income forms the basis for mutually beneficial trade.
theory of absolute advantages involves the rejection of the manufacture of unprofitable products.The concentration of resources in the production of products that benefit, promotes production volume.As a result of increased exchange between the countries.
Thus, the theory of absolute advantage is that the country exported only the products that they produce at the lowest cost.At the same time imports only those goods that other countries are made at the lowest cost.
theory of absolute advantage includes several provisions.
The first labor is the only factor of production.The theory of absolute advantage provides full-time employment.In other words, in the manufacture of products using all human resources.According to Smith, the global economy included the two countries.Trading takes place between only two commodities.Manufacturing has costs, decrease which increases the demand for products.The cost of one product expressed in the amount of labor which has been spent on its production another.Foreign trade is carried out without regulations or restrictions.
