What do you consider to be the major differences between Adam Smith's and David Ricardo's theories of international trade?

Résumé du document

The basic concept underlying all international transactions is that foreign markets are extensions of domestic markets, in the sense that goods and services produced domestically, and whose quality is reflected in the strengths of the supply and demand curves, can also be sold internationally. This market-extension concept allows for the developing of markets in different countries, regardless of the domestic market conditions. Traditionally, the significance for foreign trade is that it provides an outlet for a country's goods and services, so that employment is maintained and profits continue to increase. For this reason, classical and neoclassical economists emphasized the comparative advantage of trade, and the basis for establishing trade among partners whose advantage in production of different goods and services warranted the international exchanges. The key theorists who have introduced the notion of international trade were Adam Smith and David Ricardo. The foundations of their theories and major difference of viewpoints are the subject of this paper. Ricardo's view on international trade was based on the concept of comparative advantage. This principle is an advance on that of absolute advantage in the sense that a country suffering absolute disadvantage in the production of every commodity could still gain from trade.

Extraits

[...] The neoclassical theory of comparative advantage, which predominates now, is essentially Ricardian in spirit as it bypasses the role of the division of labor in international trade. Bibliography 1. Classical Economics: An Austrian Perspective on the History of Economic Thought, by Murray Rothbard, vol Hants, UK: Edward Elgar pp. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, ed. Edwin Cannan ( New York: Modern Library, 1937), esp. pp. 420- Jacob Viner, Studies in the Theory of International Trade (London: Allen and Unwin, 1937), p David Ricardo, Principles of Political Economy and Taxation (New York: Dutton, Everyman, 1911), esp. [...]

[...] The difference between the mercantilist and physiocratic approaches to trade was also manifested in their respective approaches to exploration. Both the British and the French engaged in the expansion of their countries' power by encouraging military conquests of lands. The British, as subjects of an island country, were very aware of the burden of markets placed on them by their geographical separation, and while they did not neglect the fertile lands of their agricultural sectors, they did recognize their limited space and the lack of resources. [...]

[...] Another major input of Ricardo is maid in his work Essay on the Influence of a Low Price of Corn on the Profits of Stock. Here the author laid out the idea of law of diminishing returns as it applied to labor and capital. The theory describes the land's value determined by the demand for the land. As industry expanded, land would appreciate in value according to its scarcity and location, with respect to industrial demand. There was also the demand for dwelling space as well as for agricultural output; as land became exhausted or of marginal use, its value would depreciate accordingly. [...]

[...] 727–48. “David Ricardo's Discovery of Comparative Advantage,” by Roy J. Ruffin, History of Political Economy, vol Winter 2002, pp. 727–48. David Ricardo, Principles of Political Economy and Taxation (New York: Dutton, Everyman, 1911), esp. Chap for his treatment of comparative costs. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, ed. Edwin Cannan ( New York: Modern Library, 1937), esp. pp. 420- 55. [...]

[...] While Smith considered agriculture to be of prime importance, he nevertheless deflated its physiocratic significance and placed it soundly within the economic function of feeding the populace. Surplus agricultural produce could most certainly be exported and goods and services not provided by the domestic economy imported. Hence, for Smith, international commerce should not be neglected, as it is important for stimulating production and earning foreign coin. However, emphasis should be placed on individual initiative and enterprise as the means of building national wealth because enterprise brings standard and new products into the markets and stimulates new demand and competition. [...]