Comparative Advantages Concept

It’s said that a country has a comparative advantage (or relative advantage) in the production of a certain good if it’s relatively more efficient in the production of that same good.

According to the Comparative Advantage Law, developed by David Ricardo and explained in his book “The Principles of Political Economy and Taxation” (where he uses a practical example involving Portugal and England), all countries benefit from the international commerce even if they are absolutely less efficient (see absolute advantage) in the production of all goods. Is sufficient that for this they specialize in the production of the goods in which they are relatively more efficient, being, those in which they present comparative advantages, acquiring those in which they are less efficient.

This is the reason by which international commerce is benefic for all countries who participate in it whatever be the development stadium of the correspondent economies, justifying the reduction and abolishment of the customs barriers restrictive to the free commerce.

 

 

Translated from Portuguese by Susana Saraiva, Portuguese-English and English-Portuguese translation specialist. Contact: spams@sapo.pt.