David Ricardo's theory of comparative advantage revolutionized trade theory from "summary" of The Worldly Philosophers by Robert L. Heilbroner
David Ricardo, the British economist of Portuguese-Jewish descent, made a significant contribution to trade theory with his theory of comparative advantage. This theory fundamentally changed the way economists and policymakers thought about international trade. Before Ricardo, the prevailing belief was that countries should produce everything they needed domestically, to protect their industries and ensure self-sufficiency. However, Ricardo argued that countries could benefit from specializing in the production of goods in which they had a comparative advantage, even if they were not the most efficient at producing those goods.
Ricardo's theory of comparative advantage is based on the idea that even if one country is more efficient than another in producing all goods, both countries can benefit from trade. This is because each country has a relative advantage in producing certain...
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