Comments on: 200 Years of Ricardian Trade Theory: How Is This Still A Thing? /2017/04/23/200-years-of-ricardian-trade-theory-how-is-this-still-a-thing/ A Critical Perspective On Development Economics Fri, 29 Dec 2017 12:23:40 +0000 hourly 1 http://wordpress.com/ By: Tom Lines /2017/04/23/200-years-of-ricardian-trade-theory-how-is-this-still-a-thing/comment-page-1/#comment-484 Wed, 09 Aug 2017 17:31:42 +0000 http://developingeconomics.org/?p=2475#comment-484 In reply to Jorge Morales Meoqui (@MoralesMeoqui).

That is one alternative explanation, but there is another. To anyone who has studied the dynamics of development, the inadequacy of the English cloth v. Portuguese wine model sticks out like a sore thumb. As Joan Robinson put it:
‘When accumulation is brought into the story, it is evident that Portugal is not going to benefit from free trade. Investment in expanding manufactures leads to technical advance, learning by doing, specialization of industries and accelerating accumulation, while investment in wine runs up a blind alley into stagnation.’ (Quoted at , p. 337).
In the early 19th century, the machine manufacture of cloth was the state-of-the-art technology on which England’s burgeoning Industrial Revolution was founded, after all.
Matthew Watson takes this a long way further with a historical analysis of trade between England and Portugal (and don’t forget Brazil!) between the 16th and early 19th centuries (‘Historicising Ricardo’s comparative advantage theory, challenging the normative foundations of liberal International Political Economy,’ 2016, freely available at ).
Watson suggests that comparative advantage was little more than a side-issue to Ricardo, which he did not develop explicitly and he never returned to. But paradoxically, it was quickly picked up in English public debate and has remained there ever since. This seems to be because trade with Portugal was a live issue at the time, and the theory provided ideological cover for a history of rapacious English exploitation of Portugal and, more importantly, its gold-rich Brazilian colony, based on superficially balanced and fair-minded treaties between the two countries. Watson’s detailed account puts the theory of comparative advantage brilliantly into its own historical perspective.

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]]> By: Towards a Critical Pluralist Research Agenda in Development Economics: Some Bricks from Berlin to Build Upon – /2017/04/23/200-years-of-ricardian-trade-theory-how-is-this-still-a-thing/comment-page-1/#comment-419 Thu, 13 Jul 2017 11:35:52 +0000 http://developingeconomics.org/?p=2475#comment-419 […] about what’s going wrong in development economics – on this blog (for example by Adel Daoud, Ingrid H. Kvangraven, or Jacob Assa) and elsewhere (for example by Angus Deaton, Dani Rodrik, and Benjamin Selwyn), as […]

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]]> By: Ny blogg om kritisk utviklingsøkonomi: – Rethinking Economics – Norge /2017/04/23/200-years-of-ricardian-trade-theory-how-is-this-still-a-thing/comment-page-1/#comment-382 Sun, 18 Jun 2017 14:10:05 +0000 http://developingeconomics.org/?p=2475#comment-382 […] 200 Years of Ricardian Trade Theory: How Is This Still A Thing? (av Ingrid Harvold Kvangraven, The New School) […]

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]]> By: asadrizvi12 /2017/04/23/200-years-of-ricardian-trade-theory-how-is-this-still-a-thing/comment-page-1/#comment-215 Tue, 02 May 2017 19:57:31 +0000 http://developingeconomics.org/?p=2475#comment-215 The originality of Ricardo’s Principles cannot be underestimated. Its basic assumptions (if we clearly see them) are quite impressive. However, that these ideas have been manipulated and taken out of their historical context & spirit to further a certain purpose is what needs serious criticism.

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]]> By: Nick Johnson /2017/04/23/200-years-of-ricardian-trade-theory-how-is-this-still-a-thing/comment-page-1/#comment-203 Mon, 24 Apr 2017 13:04:31 +0000 http://developingeconomics.org/?p=2475#comment-203 Reblogged this on and commented:
A critique of Ricardo’s theory of international trade from the blog

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]]> By: Jorge Morales Meoqui (@MoralesMeoqui) /2017/04/23/200-years-of-ricardian-trade-theory-how-is-this-still-a-thing/comment-page-1/#comment-202 Mon, 24 Apr 2017 09:52:28 +0000 http://developingeconomics.org/?p=2475#comment-202 Dear Ingrid,
I would like to answer your question: In general, because any true intellectual achievement is more resilient than its critics like to believe. And specifically in the case of Ricardo’s numerical example, because its critics and supporters do not distinguish accurately between the so-called Ricardian trade model of economic textbooks, and what Ricardo actually wrote in the Principles.
The textbook trade model has very little if anything in common with the latter. Consequently, the valid critique towards the textbook trade model does not apply to Ricardo.
I have recently published a paper that shows that some of the assumptions you have mentioned (perfect internal factor mobility, full-employment, etc.) are not present in the original numerical example.
See “Ricardo’s Numerical Example Versus Ricardian Trade Model: a Comparison of Two Distinct Notions of Comparative Advantage”
I agree with you that the many neoclassical trade fallacies will be debunked and removed one day from economic textbooks. The consequence of this development will not be a repudiation of free trade, though, but a more realistic case in favour of it; a free trade case much more in line with what Adam Smith and David Ricardo actually wrote. And Ricardo’s famous numerical example will have its proper role there, alongside some other important insights of the classical school of economic thought. You may find an early attempt here.

Best,
Jorge

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]]> By: Ricardian trade theory — how is this still a thing? | LARS P. SYLL /2017/04/23/200-years-of-ricardian-trade-theory-how-is-this-still-a-thing/comment-page-1/#comment-201 Mon, 24 Apr 2017 07:40:33 +0000 http://developingeconomics.org/?p=2475#comment-201 […] Ingrid Kvangraven […]

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]]> By: NeilW /2017/04/23/200-years-of-ricardian-trade-theory-how-is-this-still-a-thing/comment-page-1/#comment-200 Mon, 24 Apr 2017 06:57:54 +0000 http://developingeconomics.org/?p=2475#comment-200 “where they have to run persistent trade deficits and borrow externally to cover the deficit. ”
Why is this concept still a thing in an era of free floating sovereign currencies? The bit missing here is that currency is an asset to a foreign holder, so the export ‘product’ is the saving. And the national borders are not necessarily the borders of the currency area.
Nobody borrows in international trade. Somebody decides to save rather than buy output priced in the currency – and currency areas grow and shrink based upon the relative power of the currency.

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]]> By: ilanstrauss /2017/04/23/200-years-of-ricardian-trade-theory-how-is-this-still-a-thing/comment-page-1/#comment-199 Mon, 24 Apr 2017 03:54:57 +0000 http://developingeconomics.org/?p=2475#comment-199 Very interesting and well written piece. A useful resource for teaching too!
I think a key critique of Ricardo’s theory is that, while it can be shown under its assumptions that trade benefits both countries, even when one country has no absolute advantage in anything, inequality between countries will increase – even as both benefit (for a given exchange rate range). But that’s an aside.
My question is this:
What should we conclude from the one-sidedness of ‘Neoclassical’ (though Ricardo is a Classical economist – correct?) trade theory? I’d caution against us swining to the other end of ad hoc protectionism or even autarky. Fair trade is surely the alternative to totally unfettered markets. Fair trade needs to be grounded through globally agreed and enforced rules to allow for a race to the top in the global division of labour, and with sufficient assymetries and transfers built in to support LDCs and others. But the benefits of capitalism to spread beyond an elite DO require a global division of labour and a globally integrated market. How this market is managed is key. Allowing for the relatively unobstructed flow of goods and services is Therefore of vital benefit to humanity is argue, and allowing less developed economies room for development within this framework is also vital. As China shows, without access to global best practice in production, including technology, ideas, management skills, global savings, and much else, catch-up is a no starter. But with such access catch-up is at least possible. Though integration may be selective initially (as with China) it’s success still required an integrated world market.
Marx and Engel’s had a fairly critical view of List, to say the least. I’d advance essentially the same argument that they do, such that protectionism, while potentially very useful when used judiciously, is in general an “endless screw”
That is not to say that I disagree with anything in this article, which offers a striking theoretical critique of mainstream trade theory. I would just suggest that what we do with this critique is important. The protectionism of Trump, backed by certain old school Keynesians, should be resisted. A global rules based system of open trade is in LDCs interests. We now need to start arguing over what these rules should be. Not that a global division labour be dispensed with, or that (new) global rules, mutually agreed and enforced, should
not be strived for.
— sent from my iPhone excuse typos please.

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