comparative advantage (1 Viewer)

[Richiee]

does anybody know if David Ricardo's theory of comparative advantage is still used and what for specifically?

And also what are some of the loop holes in this theory.

thanks

 

[i-color]

of course it is used!!! it's the underlying theory used to promote free trade and lower protection and globalisation!!!

comparative advantage states that countries will benefit if they specialise in the g/s in which they have comparative advantage. That is why people are promoting free trade and lower protection around the world because in the long term it raises efficiency etc and benefits everyone.

 

[Richiee]

cool thanks

and do you have any knowledge of Riacardo's theory of Comparative Advantage, there are some things that he wrote that aren't quite true.
do you know what these are?

anyway thanks again

 

[George W. Bush]

for one, absolute and comparitive advantage cannot explain intra-industry trade.

 

[i-color]

well all theories are going to have its flaws and errors. The short term phillips cruve doesn't work in the long term because there is a natural rate of unemployment. And the twin-deficit argument doesn't work because it assumes savings = investment which is never true.

I think you could actually discuss some of these flaws.....but if you're doing hsc economics, i don't suggest you go into much detail about that stuff cos it's not in the syllabus....if it's for your own knowledge then yeah go ahead.

 

[Richiee]

thanks guys,
i dont actually do hsc, since i live in the ACT