Comparative advantage: Difference between revisions
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According to this theory, a country should always chose free trade, and specializes itself in the production for which it has a better [[opportunity cost]] than its partners. | According to this theory, a country should always chose free trade, and specializes itself in the production for which it has a better [[opportunity cost]] than its partners. | ||
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Revision as of 12:54, 31 October 2007
In economics, the principle of comparative advantages explains how any country can benefit from free trade, whether it has absolute advantages or not. This principle has been developped by Robert Torrens in 1815, and demonstrated in David Ricardo's Principles of political economy and taxation in 1817.
According to this theory, a country should always chose free trade, and specializes itself in the production for which it has a better opportunity cost than its partners.