Ricardo's Numerical Example Versus Ricardian Trade Model: A Comparison of Two Distinct Notions of Comparative Advantage

Abstract

The so-called Ricardian trade model of contemporary economic textbooks is not a rational reconstruction of Ricardo’s famous numerical example in chapter seven of the Principles. It differs from the latter in terms of the definition of the four numbers, relevant cost comparison, rule for specialisation, assumptions and theoretical implications. Thus, the widespread critique regarding the unrealistic assumptions of the textbook trade model does not apply to Ricardo’s original proof of comparative advantage.

Keywords: comparative advantage, David Ricardo, Ricardian trade model, international trade theory, free trade

JEL Classification: B12; F10