Monday, 6 February 2012

Ricardo and comparative advantage 2

Thanks to an email from Jorge Morales Meoqui I have been alerted to his recent paper in the journal History of Political Economy on "Comparative Advantage and the Labor Theory of Value". The abstract reads,
With the famous numerical example of chapter 7 of the Principles (1817) David Ricardo intended to illustrate first and foremost the new proposition that his labor theory of value does not regulate the price of international transactions when the factors of production are immobile between countries. Unfortunately, later scholars have often omitted this proposition when referring to Ricardo's numerical example. Instead, they have highlighted only the comparative-advantage proposition, although Ricardo considered it as a corollary of the omitted proposition and therefore inextricably linked to it. This inexplicable omission has led to an incomplete understanding of the logical construction of Ricardo's numerical example, as well as to the misinterpretation of the four numbers as unitary labor costs. With an accurate understanding of Ricardo's numerical example and the logical relationship between the two propositions it meant to prove, it is relatively easy to refute the main objections that have been raised against the very same numerical example in the past. Moreover, it reaffirms the sustained relevance of Ricardo's two propositions as important insights for understanding the current process of economic globalization.
Jorge also has a working paper "On the distribution of authorship-merits for the comparative-advantage proposition". The abstract reads,
Due to a better understanding of the logical interrelationships between the comparative- advantage proposition, the classical rule of specialization and the proposition regarding the non- appliance of the labor theory of value in international exchanges in Ricardo’s famous numerical example in the Principles, it is now possible to arrive to a definite conclusion regarding the longstanding academic debate about the true author of the comparative-advantage proposition. Torrens is not entitled to the same amount of merit as David Ricardo with regard to the comparative-advantage proposition since he fell short of formulating a full prove of it prior to the publication of Ricardo’s Principles. In the 1815 example of English cloth being traded for Polish corn, Torrens missed to apply the classical rule of specialization for Poland. For the featured international exchange to take place, though, there has to be gains from trade for both trading partners. More importantly, Torrens also failed to recognize the crucial role of Ricardo’s insight regarding the non-appliance of the law of value in international exchanges in proving the comparative-advantage proposition. Therefore, the bulk of the authorship-merit for this proposition rightly belongs to Ricardo.

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