Research David Ricardo in international trade created preconditions for its further development.Economist proved that it has a meaning even when the country has no advantages in the production of at least some types of products.He showed that there is not so much the product itself, as the ratio of costs in its production.If these differences are, it means that the country has a comparative advantage over the other and can easily deal with the release of this product.It is at its manufacturing and exporting it should specialize.
theory of comparative advantage of David Ricardo built on a number of assumptions.It comes from the fact that:
- the two countries have two products;
- all the costs of production - this is only the salary, which is also the same for all professions and qualifications;
- there is a possibility of free trade between the two countries;
- no transport costs;
- ignored varies in different countries, the level of wages.
How does the theory of comparative advantage, Ricardo pointed to the example of trade between the two European countries with cloth and wine.For economic indicators Portugal while Britain superior in production and of both.If you only come out of this, it is possible to decide that it did not make sense to trade with England.However, David Ricardo, developing the ideas of Adam Smith, went on.He developed the theory of comparative advantage.Its essence lies in the fact that the country is beneficial to trade on the international market of the products which it manufactures at minimal cost compared to the release of other goods.
So, both countries made cloth, but Portugal is more favorable, given the size of the costs engaged in production of wine and exchange it for English cloth.Britain, too, there will be offended.She will receive the wine at a reasonable price, with lower costs than in the case, if she was engaged in its manufacture and sale.
However, keep in mind that this model is too simplified.In practice, the increase in production is inevitable due to the increase in the maximum allowable expenses.It also happens that the further release of one unit of the commodity forces refuse to increase the production of others.
Still, if the theory of comparative advantage will lie in the basis of specialization, it is still ensure the growth of certain types of products and will use the world's resources more effectively.Also, it will help to save labor in the country - despite the fact that the volume of goods produced in it will remain the same or even increase.Followers of David Ricardo pointed to the fact that even when the difference in the payment of the theory of comparative advantage will not undergo significant changes.
Therefore, she advises to import those goods which are produced at a higher cost than that which is exported.Modern economists have proved that this theory really works.Not only that - it is effective for any number of participating countries and commodities, not just for two.
theory of comparative advantage has one undeniable advantage: it proves that trade between different countries is beneficial to both parties.Of course, someone will get less profit, and some more, but satisfied with the result remain all.This is the main achievement of the theory of David Ricardo.She confirmed the idea of Adam Smith's division of labor, absolutely for all participants without exception.
However, there is this theory, and one flaw: it does not explain why these same comparative advantage still add up.
