Reconciling Ricardo's Comparative Advantage with Smith's Productivity Theory

Abstract

There are three main claims in the paper: first, there is sufficient evidence for affirming that Ricardo adhered to Smith’s productivity theory second, Ricardo’s original demonstration of the comparative- advantage proposition is indeed compatible and complementary with respect to the latter; and third, Ricardo agreed with Smith’s multifactorial explanation of the pattern of trade, which includes increasing returns and economies of scale. These results suggest that the level of compatibility between the international trade theories of Smith and Ricardo is significantly higher than it is currently reflected in the economic literature. They also add a new perspective to the ongoing process of reassessment of Smith’s contributions to international trade theory, further strengthening the view that he was indeed an outstanding international trade theorist.

Keywords: Comparative Advantage, David Ricardo, Adam Smith, International Trade Theory, Division of Labour, Free Trade

JEL Classification: B12, F10