Law Commons^™

Why Ricardo's Theory Of Comparative Advantage Regarding Foreign Trade Doesn't Work In Today's Global Economy, Charles W. Murdock

Faculty Publications & Other Works

The theoretical basis for international trade is Ricardo’s theory of comparative advantage. Paul Samuelson, one of the leading lights in the economics profession in the 20th century, referred to it as one of the most beautiful ideas in economics. Yet, no one seems to have considered its validity in the context of the current global trade environment.

What free-trade advocates have not done is to look at the bases underlying Ricardo’s theory, namely, that capital is loyal to the country of origin and that the value of currencies is responsive to imbalances in trade. This article demonstrates that capital is …