The Theory Of Comparative Advantage By David Ricardo

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Economists have promoted free trade since the conceptualization of the theory of comparative advantage by David Ricardo in the early nineteenth century. The policy implication of Ricardo’s theory was a transition from trade protection to free trade. As an academic concept the theory is one of static general equilibrium, however the model does not provide any logical framework for dealing with factors such as technology gaps, or strong competition from developed countries. The model’s static and simple framework has no means of accounting for such questions. Developed countries with strong competitive economies promote free trade policies in order to expand that economy and prevent it from stagnating. Nonetheless developed countries did not always promote free trade policies, instead for numerous of years those countries practiced protectionism. Friedrich List’s infant industry theory argues that infant industries are unable to compete with well-established industries located mostly in developed nations. Majority of countries in the world have applied the infant industry theory to expand their industrial base prior to promoting free trade. Using controlled comparison of the Smooth-Hawley Act of 1930 in the United States and the repeal of British Corn laws in 1846, the transition from protectionism to free trade is apparent. Domestic political constraints promote infant industry strategy as an effective method to expand economies in order to prepare them for the free trade
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