Constructing a Myth that Ricardo Was the
Father of the Ricardian Model ofInternational Trade:
A Reconsideration of Torrens’ Principles ofComparative Advantage and Gain-from-trade
Taro Hisamatsu

September 2016
Discussion Paper No.1630

GRADUATE SCHOOL OF ECONOMICS
KOBE UNIVERSITYROKKO, KOBE, JAPANTorrens’ Principles of Comparative Advantage and Gain-from-trade1

Constructing a Myth that Ricardo Was the
Father of the Ricardian Model ofInternational Trade:
A Reconsideration of Torrens’ Principles ofComparative Advantage andGain-from-trade†
Taro Hisamatsu

Abstract
Historians of economic thought have often pointed outthat Ricardo’s famous England-Portugal model differsfrom the “Ricardian model” presented in modern
international economics textbooks. This paper argues
that the erroneous belief that David Ricardo was thefather of the Ricardian model might have arisen from
Robert Torrens’ own explanations of comparativeadvantage and his repeated claims. The principle ofcomparative advantage put forward by Torrens has
much in common with the modern Ricardian model. In
the early twentieth century, distinguished writers ofinternational trade theory devoted their attention to agreat controversy among famous economists in theauthoritative The Economic Journal about who should
be considered the true father of comparative advantage,
Ricardo or Torrens, and concluded that Ricardo, in his
text, proposed the same principles of comparativeadvantage as Torrens had presented.

1. Introduction
An enduring controversy in the century-long history of
economic thought is who discovered the principle ofcomparative advantage. Edwin Seligman (1903), whoin 1903 was president of the American Economic
Association, first stressed that Robert Torrens(1780?-1864) in 1815 anticipated David Ricardo’s
1817 principle of comparative advantage.1 The claim† A part of the paper is based on Hisamatsu (forthcoming)

written in Japanese. The author has been supported by JSPS
Grant-in-Aid for Scientific Research (B): 25780144 and (B):
16K17095.
1
More correctly, Leser (1881) first mentioned Torrens’ 1815
discovery, but his “comment attracted no notice” (Viner 1937,
441-2).

was resolutely opposed by Jacob Hollander (1910)
who held the view that it was Ricardo’s discovery. A
controversy ensued in The Economic Journal, one of
the most authoritative publications in the field of
economics (Seligman and Hollander 1911).
Seligman’s claim gained the support of later
distinguished economists, such Gottfried Haberler(1933), Jacob Viner (1937), Joseph Schumpeter (1954),
Lionel Robbins (1958), John Chipman (1965), Paul
Samuelson (1969), Douglas Irwin (1996), MarryKemp, and Masayuki Okawa (2006), not to mention
Roy Ruffin (2002; 2005), who insisted on “debunking
a myth” of Torrens’ 1815 anticipation and declared
Ricardo’s 1816 discovery. Ruffin was overwhelmingly
in favor of the view that what Torrens described in
1815 was the concept of absolute advantage.2“The myth,” Ruffin (2005, 711) wrote, “was started
by Torrens himself in 1826 [in the third edition ofExternal Corn Trade] and was given a boost whenJohn Stuart Mill (…) reported Torrens’s claim in afootnote” of the chapter on international trade, in the1862 edition of the Principles of Political Economy.
However, Torrens’ 1826 and 1857 claims, the latter ofwhich was reported by J. S. Mill, give rise to somequestions that should be reconsidered.
Giancarlo de Vivo (2010) argues that there is “afuller statement” of the principle of comparativeadvantage “than the rather cursory one we find in
Torrens’s 1815 External Corn Trade” in a pamphlet
entitled Considerations on the Importation of Foreign
Corn published anonymously in 1814. In the preface
to the first edition of External Corn Trade, Torrens(1815, xiv) did acknowledge that he had read thepamphlet. Therefore, it has been pointed out that
Torrens “might have borrowed” the principle from it(Grančay and Grančay 2015, 71). However, there is noreference to the pamphlet in the preface to the 1826
edition of Torrens’ External Corn Trade. Is it true thenthat Torrens might have borrowed the comparativeadvantage arguments from the pamphlet?
One must also wonder why, despite having read all
the editions of Ricardo’s Principles (1817-23), Torrens
did not claim priority until 1826.
2

For details of the debate, see Grančay and Grančay (2015,70-1). See also Aldrich (2004).

Torrens’ Principles of Comparative Advantage and Gain-from-trade
2

Furthermore, Torrens implicitly recanted his
previous claims between April 22 and November 17,
1843, and in 1852 accepted Ricardo’s contributions to
the theories of international trade (Torrens 1843a;
1843b; 1852, 17). Why did Torrens re-claim his
priority in 1857?
On the other hand, one should note the following
concerning Ricardo’s trade model of comparativeadvantage. Yukizawa ([1974] 1988), Ruffin (2002),
and Maneschi (2004), following Sraffa’s (1930)
interpretation, were the first seriously to point out that
Ricardo’s famous England-Portugal model differedfrom the “Ricardian model” presented in modern
international economics textbooks. It is also argued
that Ricardo shed light on the savings of labor rather
than on the amount of use value in considering gains
from trade (Tabuchi 2006), and that his model only
explains the extension of what Viner (1937, 440)
called the “eighteenth-century rule” (Faccarello 2015b,
758; Gehrke 2015, 811). Faccarello (2015b),
furthermore, argues that Ricardo did not always state
the international immobility of capital and labor; that,for him, there were no significant differences between
domestic and international trade, and that his
discussion of comparative advantage was not a“principle.” Some historians of economic thought havesaid that the explanations given by James Mill and/or
his son led modern economists to believe that Ricardo
was the father of the modern Ricardian model(Yukizawa [1974] 1988, 124; Tabuchi 2006, Chapter4). However, one cannot ignore the possibility that thiserroneous interpretation might have arisen from
Torrens’ own explanations of comparative advantage
and his repeated claims.
This paper examines Torrens’ 1826 and 1857 claims,
considering how he was involved in the disseminationof an erroneous interpretation that Ricardo was thefather of the Ricardian model. Section 2 discusses how
Ricardo’s England-Portugal model, as well as James
Mill’s gain-from-trade theory, was viewed. Section 3
considers Torrens’ 1826 claim, his 1815 discussion,and his 1827 principle with respect to comparativeadvantage. Section 4 indicates that he might not haveborrowed the comparative advantage arguments fromthe1814 anonymous pamphlet and argues that, in early
1826, he could have learned of the principle fromJames Pennington’s criticism of James Mill’s earlytheory of gain-from-trade and James Mill’s correction
thereof in the third edition of the Elements of Political
Economy. Torrens’ 1843 revocation of his previous
claim and his new claim in 1857 are dealt with in
Section 5, which also examines his early theory ofgain from trade. We show that he himself never tried
to claim priority of his discovery of comparativeadvantage; it was posterity that misunderstood Mill’sfootnote to the explanation of comparative advantage.
Section 6 concludes the paper.
2. The Principle of Comparative Advantage:
Ricardo and Later Developments
2.1 The Ricardian model of international trade
It is well known that Ricardo, in the chapter on foreign
trade of his Principles, presented the famous “fourmagic numbers” (Samuelson 1969, 4) of 80, 90, 100,
and 120. Many textbooks of international economics
interpret these numbers as constant input coefficientsof labor and, following this interpretation, proceed to
explain the modern “Ricardian model” of international
trade. The basic assumptions in these textbooks are as
follows:
The world consists of two countries of almost thesame economic scale, England (𝐻) and Portugal (𝐹),and two kind of goods, cloth (𝑋) and wine (𝑀), which
are produced using a single factor, labor. Labor canmove freely between industries in the homecountry―so that the labor force is fully employed in
the domestic market―but not between nations. Traderequires no cost of carriage of goods. Each good is
produced by the technology of constant returns toscale and thus the four numbers refer to input
coefficients of labor for the production of one unit of𝑗good 𝑖 (𝑖 = 𝑋, 𝑀) in country 𝑗 (𝑗 = 𝐻, 𝐹): 𝑎𝑖 (>0). Both countries have an identical utility function(indifference curve) with homothetic preference,
which means the gains from trade are directly
expressed by the amount of utility (use value). 3
Denoting the outputs of cloth and wine by 𝑦𝑋 ∈ ℝ+ and𝑦𝑀 ∈ ℝ+ , respectively, we may, for example, consider the use
value function which is shown as the real-value function ofthese two variable ( 𝑢: ℝ2+ → ℝ+ ): 𝑢(𝑦𝑋 , 𝑦𝑀 ) with strong
monotonicity: for any sets of outputs, (𝑦𝑋 , 𝑦𝑀 ) and (𝑦̃𝑋 , 𝑦̃𝑀 ),3

Torrens’ Principles of Comparative Advantage and Gain-from-trade3

England has a comparative advantage in producing
cloth, while Portugal has a comparative advantage inwine, as Table 1 shows.
Table 1 Ricardo’s four numbers based on the
traditional interpretation

Cloth(Good 𝑋)
Wine
(Good 𝑀)

England(Country 𝐻)

Portugal(Country 𝐹)

𝑎𝑋𝐻 = 100

𝑎𝑋𝐹 = 90

𝐻
𝑎𝑀
= 120

𝐹
𝑎𝑀
= 80

In this case, if the terms of trade lie in the𝐻∗𝐹range 𝑎𝑋𝐻 ⁄𝑎𝑀< 𝑝𝑋∗ ⁄𝑝𝑀
< 𝑎𝑋𝐹 ⁄𝑎𝑀
, both countries
completely specialize in the production of the good inwhich each has a comparative advantage and fromwhich both can enjoy a greater amount of utility.
However, Ricardo’s own economic system is asfollows. First, the production of agricultural goods
exhibits diminishing returns. In his chapter on foreign
trade, he illustrates his England-Portugal model by
replacing the production of wine with the phrase “thecultivation of vines” or “growing vines” (135, 137);
that is, wine was assumed to be an agricultural good
(grape). He clearly endeavored to explain his theory ofinternational trade to consider the benefits of freeimportation of corn, the production of which involved
diminishing returns. Assuming “that there arediminishing returns to labor in the production of atleast one good (…) yields the economy’s concave
transformation curve” (Maneschi 2004, 438) so that
trade would not generate complete but incomplete
specialization. In fact, Ricardo himself said: “It willappear then, that a country possessing very
considerable advantages in machinery and skill, andwhich may therefore be enabled to manufacturecommodities with much less labour than her neighbors,may, in return for such commodities, import a portionof the corn required for its consumption, even if its
lands were more fertile, and corn could be grown withless labour than in the country from which it was
imported” (1817, 160; see Gehrke 2015, 809).
Furthermore, in Ricardo’s England-Portugal model,
England’s pattern of specialization is determined𝑢(𝑦̃𝑋 , 𝑦̃𝑀 ) > 𝑢(𝑦𝑋 , 𝑦𝑀 ) if 𝑦̃𝑋 ≥ 𝑦𝑋 and 𝑦̃𝑀 > 𝑦𝑀 , or𝑦̃𝑋 > 𝑦𝑋 and 𝑦̃𝑀 ≥ 𝑦𝑀 .

independently of Portuguese production conditions,while Portugal’s pattern is fixed independently of
England’s circumstance (Ricardo 1817, 158-9; see
Chipman 1965, 479-80).
These points were resolved by Sraffa’s (1930)
interpretation of Ricardo’s four numbers, based on
which Yukizawa ([1974] 1988), Ruffin (2002), andManeschi (2004) proposed a new interpretation ofRicardo’s two-county, two-good model.
2.2 New interpretation of Ricardo’s four magic
numbers
Assume cloth is produced with constant returns tolabor while wine is produced with diminishing returns.
Denoting the outputs of cloth and wine in country 𝑗𝑗𝑗
by 𝑦𝑋 and 𝑦𝑀 , respectively, and the labor force𝑗𝑗employed in producing them by 𝐿𝑋 and 𝐿𝑀 ,respectively, let their production functions be given as𝑗𝑗𝑗𝑗𝑦𝑋 = 𝑓𝑗 (𝐿𝑋 ) with 𝑓𝑗 ′(𝐿𝑋 ) > 0 and 𝑓𝑗 ′′(𝐿𝑋 ) = 0,
𝑗
𝑗
𝑗
and
𝑦𝑀 = 𝑔𝑗 (𝐿𝑀 )with𝑔𝑗 ′(𝐿𝑀 ) > 0
and𝑗𝑗
𝑔𝑗 ′′(𝐿𝑀 ) < 0, respectively. In addition, let 𝐿 be thelabor endowment in country 𝑗 , that is, it is thecountry’s fully employed labor force; the production
possibility set and frontier (transformation curve) are
𝑗 𝑗
𝑗
𝑗
𝑗
given as {(𝑦𝑋 , 𝑦𝑀 )|𝑓𝑗−1 (𝑦𝑋 ) + 𝑔𝑗−1 (𝑦𝑀 ) ≤ 𝐿𝑗 , 𝑦𝑋 ≥𝑗𝑗𝑗0, 𝑦𝑀 ≥ 0},and
𝐿𝑗 = 𝑓𝑗−1 (𝑦𝑋 ) + 𝑔𝑗−1 (𝑦𝑀 ) ,𝑗𝑗respectively. From 𝑓𝑗 ′′(𝐿𝑋 ) = 0 and 𝑔𝑗 ′′(𝐿𝑀 ) < 0,
we can derive a concave transformation curve.
Let 𝑦𝑋∗ (> 0) be given as units of cloth that is traded∗for 𝑦𝑀(> 0) units of wine; that is, the terms of trade
∗⁄ ∗
∗⁄ ∗
are 𝑝𝑋 𝑝𝑀 = 𝑦𝑀
𝑦𝑋 . Ricardo’s four numbers, basedon Sraffa’s interpretation, are as shown in Table 2.
Table 2 Ricardo’s four numbers based on the newinterpretation
England
Portugal(Country 𝐻)(Country 𝐹)
Cloth
𝑓𝐻−1 (𝑦𝑋∗ ) = 100
𝑓𝐹−1 (𝑦𝑋∗ ) = 90
(Good 𝑋)
Wine∗)∗)
𝑔𝐻−1 (𝑦𝑀= 120
𝑔𝐹−1 (𝑦𝑀= 80(Good 𝑀)
Gainsfrom trade∗)𝑔𝐻−1 (𝑦𝑀− 𝑓𝐻−1 (𝑦𝑋∗ )∗)𝑓𝐹−1 (𝑦𝑋∗ ) − 𝑔𝐹−1 (𝑦𝑀

= 20

= 10

England gives 𝑦𝑋∗ units of cloth, produced using∗
100 units of labor, for 𝑦𝑀
units of wine, the domestic
production of which would require 120 units of labor.

Torrens’ Principles of Comparative Advantage and Gain-from-trade4

Trade enables England to save 20 units of her laborand the country has an opportunity to enjoy a greateruse value. Ricardo stated: “England may be socircumstanced that to produce the cloth may require
the labour of 100 men for one year; and if she
attempted to make the wine, it might require the labourof 120 men for the same time. England would
therefore find it [in] her interest to import wine, and topurchase it by the exportation of cloth (Ricardo∗
1951-73, I, 135; Emphasis added).” Portugal gives 𝑦𝑀
units of wine, produced using 80 units of labor, for 𝑦𝑋∗
units of cloth, the home production of which would
require 90 units of labor costs. Trade enables Portugal
to save 10 units of her labor and the country has anopportunity to enjoy a greater use value. Ricardo went
on to state: “To produce the wine in Portugal might
require only the labour of 80 men for one year, and to
produce the cloth in the same country, might require
the labour of 90 men for the same time. It would
therefore be advantageous for her to export wine inexchange for cloth (135; Emphasis added).”J. S. Mill (1844, 5-7) later argued:
Mr. Ricardo, while intending to go no further into
the question of the advantage of foreign trade thanto show what it consisted of, and under whatcircumstance it arose, unguardedly expressed
himself as if each of the two countries making theexchange separately gained the whole of thedifference between the comparative costs of the two
commodities in one country and in the other. (…)
This, which was not an error but a mere oversight of
Mr. Ricardo, arising from his having left thequestion of the division of the advantage entirely
unnoticed, was first corrected in the third edition of
Mr. Mill’s Elements of Political Economy.
2.3 James Mill and the Gain-from-Trade Theory
In the first and second editions, James Mill proposed
numerical examples, in which constant returns in
producing corn as well as cloth were assumed (1821,
86-7; 1824, 116-7).4
England gives 𝑦𝑋∗ units of wine, which is produced∗by 150 units of labor, for 𝑦𝑀
units of corn, the4The explanation follows Tabuchi (2006, 97-102).

domestic production of which would require 200 unitsof labor. Trade enables England to save 50 units of her
labor and the country can enjoy a greater use value.
∗
Portugal, however, gives 𝑦𝑀
units of cloth, which is
produced by 100 units of labor, for 𝑦𝑋∗ units of cloth,
the product of which would require the same laborcosts. Thus, Poland can save no unit of labor and thus
cannot enjoy a greater use value (Table 3).
Table 3 Mill’s four numbers: Case of attributing all
the gains to England

Cloth(Good 𝑋)
Corn
(Good 𝑀)
Gains fromtrade

England(Country 𝐻)

Poland(Country 𝐹)

𝑎𝑋𝐻 𝑦𝑋∗ = 150

𝑎𝑋𝐹 𝑦𝑋∗ = 100

𝐻 ∗𝑎𝑀
𝑦𝑀 = 200𝐹 ∗𝑎𝑀
𝑦𝑀 = 100𝐻 ∗𝑎𝑀
𝑦𝑀 − 𝑎𝑋𝐻 𝑦𝑋∗ = 50

𝐹 ∗𝑎𝑋𝐹 𝑦𝑋∗ − 𝑎𝑀
𝑦𝑀 = 0In the same manner, Mill illustrated the case inwhich trade enables Poland to save units of labor𝐹 ∗(𝑎𝑋𝐹 𝑦𝑋∗ − 𝑎𝑀
𝑦𝑀 > 0) and to enjoy a greater use value,𝐻 ∗while England saves no units of labor ( 𝑎𝑀𝑦𝑀 −𝐻 ∗𝑎𝑋 𝑦𝑋 = 0) and thus cannot enjoy a greater use value.
Mill, in the earlier editions of Elements,
demonstrated that the gains would accrue entirely to
only one country. The lack of gains from trade,however, would not induce the countries to exchange
their goods with each other. Mill, in the third edition,“corrected an error of the former editions” (Mill 1826,iv), following criticisms from his son, William Ellis(1800-81), and George John Graham (1801-88), whowere members of the study group at George Grote’s
house (Mill 1873, 121-2). Mill (1826, 122) added tothe illustration, the sentence, “The result ofcompetition would be to divide the advantage equally
between them.” This was “not merely [a] verbal” (iv)alternation, since it implied the range of terms of trade,𝐻∗
𝐹 5
𝑎𝑋𝐻 ⁄𝑎𝑀< 𝑝𝑋∗ ⁄𝑝𝑀
< 𝑎𝑋𝐹 ⁄𝑎𝑀.
𝐻 ∗𝐹 ∗From 𝑎𝑀𝑦𝑀 − 𝑎𝑋𝐻 𝑦𝑋∗ > 0 , 𝑎𝑋𝐹 𝑦𝑋∗ − 𝑎𝑀
𝑦𝑀 = 0, and
∗⁄ ∗
∗⁄ ∗
𝑝𝑋 𝑝𝑀 = 𝑦𝑀 𝑦𝑋 , the condition of attributing all the gain to
𝐻∗𝐹
England can be shown as 𝑎𝑋𝐻 ⁄𝑎𝑀< 𝑝𝑋∗ ⁄𝑝𝑀
= 𝑎𝑋𝐹 ⁄𝑎𝑀
. On the
𝐻 ∗
𝐻 ∗
𝐹 ∗
𝐹 ∗
other hand, from 𝑎𝑀 𝑦𝑀 − 𝑎𝑋 𝑦𝑋 = 0 , 𝑎𝑋 𝑦𝑋 − 𝑎𝑀 𝑦𝑀 > 0∗∗⁄ ∗and 𝑝𝑋∗ ⁄𝑝𝑀= 𝑦𝑀
𝑦𝑋 , the condition of attributing all the gain
𝐻∗
𝐹
to Portugal can be shown as 𝑎𝑋𝐻 ⁄𝑎𝑀= 𝑝𝑋∗ ⁄𝑝𝑀
< 𝑎𝑋𝐹 ⁄𝑎𝑀
. Thus,5

the condition that both of them can enjoy the gains can be𝐻∗𝐹shown as 𝑎𝑋𝐻 ⁄𝑎𝑀< 𝑝𝑋∗ ⁄𝑝𝑀
< 𝑎𝑋𝐹 ⁄𝑎𝑀.

Torrens’ Principles of Comparative Advantage and Gain-from-trade
5

J. S. Mill (1844, 5) believed that both his father andRicardo did not “inquire, in what proportion theincrease of produce, arising from the saving of labour,
is divided between the two countries.” He explained
the determination of the terms of trade in his later
essay on international trade. In so doing, J. S. Mill
(1844, 6-7) borrowed from his father’s four numberspresented in the second edition of Elements (Mill 1824,
118-9), which are easily convertible to units of laborfor one unit of each good in each country.
Consequently, historians of economic thought believethat J. S. Mill’s explanation could have led
twentieth-century writers of international economics tomisinterpret Ricardo’s “four magic numbers” as input
coefficients of labor. However, one cannot ignore thepossibility that the erroneous interpretation might havespread from Torrens’ own explanations of comparativeadvantage and his repeated claims.
3. Torrens’ Principle of Comparative Advantage
3.1 The 1826 claim
In the preface to the third edition of External Corn
Trade, Torrens claims that in “the earlier edition,” he“first” showed the principle “that commodities, thecost of producing which is greater in foreign countries
than at home, may, nevertheless, be imported,
provided the comparative disadvantage of the foreign
capitalist in producing the imported article be less thanthe comparative advantage of the domestic capitalist in
producing the articles exported in exchange,” whichwas “adopted” by Ricardo and forms “theground-work” of the chapter on foreign trade of “hisvery valuable work upon Political Economy andTaxation” (Torrens 1826, vii). Faccarello (2015a, 72)
says: “It was Torrens who (…) started to clearly
designate the doctrine [of comparative advantage] withthephrases‘comparativeadvantage’or‘disadvantage’”; however, Torrens’ own usage isdecidedly ambiguous.6
Denoting the cost of producing one unit of good 𝑖𝑗in country 𝑗 by 𝑎𝑖 (> 0), what he intended to state𝐹𝐻
may be as follows: even though 𝑎𝑀> 𝑎𝑀, Home (𝐻)6

Nawa (1962, 9-10) points out that Torrens’ ambiguity shows
his confusing comprehension of the trade theory of comparative
production costs.

“may” import good 𝑀 from Foreign (𝐹) (and export𝐹⁄ 𝐻
good 𝑋 to 𝐹) if 𝑎𝑀
𝑎𝑀 < 𝑎𝑋𝐹 ⁄𝑎𝑋𝐻 , where the left
side represents what Torrens said was “thecomparative disadvantage of the foreign capitalist in
producing the imported article” and the right side “thecomparative advantage of the domestic capitalist in
producing the articles exported in exchange.”7 Despite
Torrens’ ambiguous language and the absence of areference to the existence of the terms of trade
𝐻𝐹
between 𝑎𝑋𝐻 ⁄𝑎𝑀
and 𝑎𝑋𝐹 ⁄𝑎𝑀, he did, following theidea of comparative advantage, mention a doctrine
regulating the pattern of specialization and unlike
Ricardo, regarded it as a “principle.”
3.2 The 1815 discussion of comparative advantage
Torrens, Ruffin (2005, 717) points out, frequently
referred to the trade theories of absolute advantage inthe first edition. For example, Torrens (1815, 297), in
Chapter 2 of Part III argued: “When any given portionof capital can, in England, fabricate a greater quantityof cloth than in Poland; and can, in Poland, produce agreater supply of corn than in England; then, theabsence of regulation is all that is necessary toestablishing between the countries an active andmutually beneficial commerce.” Denoting the input
coefficient of capital employed in producing one unit𝑗of good 𝑖 in country 𝑗 by 𝑏𝑖 (> 0) and “any given
portion of capital” commonly employed in any
̅ (> 0 ), let the
production in both countries by 𝐾𝑗̅
output be given as 𝐾⁄𝑏𝑖 . According to Torrens, thenecessary condition to establish reciprocal trade
between both countries is that England (𝐻) has an
absolute advantage in cloth (𝑋) and Poland (𝐹) has an̅ ⁄𝑏𝑋𝐻 > 𝐾̅ ⁄𝑏𝑋𝐹 andabsolute advantage in corn (𝑀): 𝐾
𝐹⁄ 𝐻
In common usage, the very inequality 𝑎𝑀
𝑎𝑀 < 𝑎𝑋𝐹 ⁄𝑎𝑋𝐻
means that Home has a comparative advantage in producing
good 𝑋 and Foreign has a comparative advantage in producing
good 𝑀, or that Home has a comparative disadvantage inproducing good 𝑀 and Foreign has a comparative
disadvantage in producing good 𝑋. Therefore, Torrens shouldhave stated that a good, the cost of production of which isgreater in Foreign than at Home, may nevertheless be imported,
provided the ratio of absolute disadvantage of Foreign in𝐹⁄ 𝐻
producing the imported good (𝑎𝑀𝑎𝑀 > 1) is less than the ratio
of absolute advantage of Home in producing the exported good(𝑎𝑋𝐹 ⁄𝑎𝑋𝐻 > 1), with both ratios being strictly more than one.
7

Torrens’ Principles of Comparative Advantage and Gain-from-trade
6
𝐻
𝐹
𝐻
𝐹
̅ ⁄𝑏𝑀
̅ ⁄𝑏𝑀
𝐾
<𝐾
, or 𝑏𝑋𝐻 < 𝑏𝑋𝐹 and 𝑏𝑀> 𝑏𝑀. However,there is the following discussion in the same chapter:

If England should have acquired such a degree ofskill in manufactures, that, with any given portion ofher capital, she could prepare a quantity of cloth, forwhich the Polish cultivator would give a greater
quantity of corn than she could, with the same
portion of capital, raise from her own soil, then,tracts of her territory, though they should be equal,
nay, even though they should be superior, to thelands in Poland, will be neglected; and a part of
supply of corn will be imported from that country.
For, though the capital employed in cultivating at
home might bring an excess of profit [produce] overthe capital employed in cultivating abroad, yet,under the supposition, the capital which should be
employed in manufacturing, would obtain a still
greater excess of profit [produce]; and this greater
excess of profit [produce] would determine thedirection of our industry. (264-5; square brackets in
Torrens 1826, 353; emphasis added)
On the basis of the six words, “even though theyshould be superior,” Seligman (1903; 1911), Chipman(1965), and others, regard Torrens as the father ofcomparative advantage. Torrens here mentioned that𝐻𝐹̅ ⁄𝑏𝑋𝐻 > 𝐾̅ ⁄𝑏𝑋𝐹 ) and 𝑏𝑀
even if 𝑏𝑋𝐻 < 𝑏𝑋𝐹 (or 𝐾
< 𝑏𝑀
𝐻
𝐹
̅ ⁄𝑏𝑀
̅ ⁄𝑏𝑀
(or 𝐾
>𝐾
), England would import Polishcorn instead of engaging in domestic production.
Despite the ambiguity, this was based on the idea ofcomparative advantage.
Ruffin (2005, 716), however, cannot accept that “ahandful of words constitutes a theory,” and considers
Torrens an absolute advantage theorist on the groundsof his many discussions based on absolute advantage
in his 1815 text (see also, 715-8). However, his 1826
claim cannot be rejected outright if there were even theslightest discussion on comparative advantage. The
important point to consider is whether, in 1815,
Torrens could properly understand comparativeadvantage as a principle or a theory.
Note the replacement of the phrase “excess of profit”
with “excess of produce” in 1826. Ruffin does pointout: “To an economist, if profit rates are equalized
across sectors, as Smith and Ricardo emphasized,

comparing profit rates at home with those abroad
would have to show that the excess of profit at homeover abroad in manufacturing would have to be thesame as in corn production under autarky” (717).
Therefore, it is incorrect “to explain the pattern ofspecialization by comparing profit rates at home withthose abroad” (716-7). Chipman (1965, 482), who
believes Torrens’ discovery, even wonders if the 1815
mention of “excess of profit” “distracts considerablyfrom the worth of the statement.” Torrens’ alternation
leads one to believe that, in 1815, he might not haveunderstood comparative advantage as a theory, as
Ruffin argues.
3.3 The 1827 Principle of Comparative Advantage
The fourth edition “differs from the third in nothing
except in the addition of a new Section [Section 4,
Chapter 4, Part III], explaining the “Effects of Free
Trade upon the Value of Money” (Advertisement for
the Fourth Edition), in which Torrens first properly
illustrated the principle of comparative advantage withnumerical examples. He demonstrated the proposition:“No difference, however great, in the cost of
production universally in one country, and the cost of
production universally in another, can occasion aninterchange of commodities between them” (Torrens
1827, 401).
Torrens first supposed that, in England (𝐻 ), “aquarter of corn” (𝑀) and “a bale of cloth” (𝑋) are“each produced at the same cost represented by 10”
𝐻(𝑎𝑋𝐻 = 𝑎𝑀= 10) and that they are “all equal to eachother in exchangeable value” in England’s market
𝐻
𝐻(𝑎𝑋𝐻 ⁄𝑎𝑀= 𝑝𝑋𝐻 ⁄𝑝𝑀
= 1); in Poland (𝐹), meanwhile, aquarter of corn and a bale of cloth are “each produced
𝐹
at a double cost, represented by 20” (𝑎𝑋𝐹 = 𝑎𝑀
= 20)
and thus are “all equal to each other in value” in𝐹𝐹Poland’s market (𝑎𝑋𝐹 ⁄𝑎𝑀= 𝑝𝑋𝐹 ⁄𝑝𝑀
= 1). Then, “[i]nPoland, a quarter of corn is just worth a bale of cloth(…) ; and if this corn were sent to England, where it isalso just worth a bale of cloth (…), it would purchase,in the foreign [England’s] market, exactly the same
quantity of all other commodities which it could havepurchased in the home [Poland’s] market.” That is,there are no gains from trade in both countries on the𝐻∗𝐹
condition, 𝑎𝑋𝐻 ⁄𝑎𝑀= 𝑝𝑋∗ ⁄𝑝𝑀
= 𝑎𝑋𝐹 ⁄𝑎𝑀
. “ThoughTorrens’ Principles of Comparative Advantage and Gain-from-trade7

England produced all commodities for half the costrequired to produce them in Poland, yet, between thetwo countries, no exchange would take place” (401-2).
Torrens next assumed that there was “the difference
between the comparative cost of producing
commodities in one country, and the comparative costof producing them in others.” “If, in Poland, the costof producing cloth (…) continued to be twice as great
as in England, while the cost of raising corn fell to an
equality with the cost of raising it in England”
𝐹
𝐻( 𝑎𝑋𝐹 = 20 , 𝑎𝑀
= 10 and 𝑎𝑋𝐻 = 𝑎𝑀
= 10 ), “thenPolish corn would be exchanged for English cloth andiron.”
Table 4 Torrens’ 1827 four numbers: Comparative costtheory of production
England
Poland(Country 𝐻)(Country 𝐹)
Cloth
𝑐𝑋𝐻 = 10𝑐𝑋𝐹 = 20
(Good 𝑋)
Wheat
𝐻
𝐹
𝑐𝑀
= 10
𝑐𝑀
= 10
(Good 𝑀)

“Under these circumstances, a quarter of corn, in
Poland, would be worth only half a bale of cloth”
𝐹
𝐹(𝑎𝑋𝐹 ⁄𝑎𝑀= 𝑝𝑋𝐹 ⁄𝑝𝑀
= 2), “while, in England, it would𝐻𝐻
be worth a whole bale” (𝑎𝑋𝐻 ⁄𝑎𝑀= 𝑝𝑋𝐻 ⁄𝑝𝑀
= 1). “APolish merchant, after purchasing a quarter of corn for
half a bale of cloth, might send the corn to England,and bring back, in exchange, a whole bale, thus
realizing a profit of one hundred per cent., less theexpense of carriage.” That is, there are no gains from𝐻
trade in Poland on the condition 𝑎𝑋𝐻 ⁄𝑎𝑀
=
∗⁄ ∗
𝐹⁄ 𝐹
𝑝𝑋 𝑝𝑀 < 𝑎𝑋 𝑎𝑀 . It should be noted, however, that
the Polish merchant, on Torrens’ supposition, has topay the sum worth 0.05 bale ―10% of his gain of 0.5
bale― as the carriage costs (402-3). On the other hand,considering carriage costs, England’s trading would
incur a loss, and thus the country has no incentive totrade. The absence of trade must be accompanied by
the non-participation of Poland. From Torrens’
argument that trade must be always reciprocal, it is not𝐻difficult to induce the condition 𝑎𝑋𝐻 ⁄𝑎𝑀
<
∗⁄ ∗
𝐹⁄ 𝐹
𝑝𝑋 𝑝𝑀 < 𝑎𝑋 𝑎𝑀 .
From the above, we see that the existence of gains
from trade must depend on “the difference between thecomparative cost of producing commodities in one

country, and the comparative cost of producing themin others,” “the rate of profit,” and “the expense ofcarriage.” Torrens pointed out that the terms of trade∗(𝑝𝑋∗ ⁄𝑝𝑀) are determined by “the proportion which
exists between the demand for foreign commodities in
the home market, and the demand for domestic
commodities in foreign markets” (401). The referenceby Torrens was 16 years before the publication of J. S.
Mill’s theory of reciprocal demand.
Note that, in the above examples, it was assumed
that there are constant returns on the production of any
good. The Torrensian system, like the Ricardian,requires the assumption of diminishing returns inagriculture, but some numerical examples in his
writings (Torrens 1819; 1821), for the sake ofsimplification, assumed constant returns even in
agricultural production.
4. Torrens’ Learning of Comparative Advantage
4.1 Torrens and the Anonymous 1814 Pamphlet
In the preface to the first edition of External Corn
Trade, Torrens clearly acknowledged “that one or twoof the arguments contained in the Second Part,8 may
have been suggested by a pamphlet of considerable
merit, entitled ‘Observations [Considerations] on the
Importation of Foreign Corn’, and an excellent article[Mill (1814)] which appeared in the Eclectic Review”(Torrens 1815, xiv). The author of Considerations toImportation of Foreign Corn states:
If one of the countries, equally capable of producing
the same thing by means of the same labor andcapital, should however be able to direct that laborand capital to more advantageous pursuits, theadvantage to that country in so doing must be notless apparent, although it should thereby be obliged
to receive from the other country the things which it
could otherwise have produced within itself.
Supposing England and Germany both capable ofproducing to the manufacture of cotton cloth,
producing a quantity of it greatly beyond what8

De Vivo (2010, 101) points out: “The fact that Torrens’s
acknowledgement refers to Part II of the External Corn Trade,
whereas his own formulation of the comparative cost principle
appears in Part III, is rather irrelevant.”Torrens’ Principles of Comparative Advantage and Gain-from-trade8

Germany may be able to produce by the similar
application of its labor and capital, then must bothcountries still be benefited by the exchange.
Germany in this case obtaining the cotton cloth at acheaper rate than that at which, relatively to the ironor wheat, it could have been made for in Germany;
yet sufficiently above that of the labor and capitalrequired for its production in England, by means ofsuperior ingenuity, to make the exchange also
advantageous to England. Germany obtains more
cotton cloth than it could have fabricated for itself,by means of the same labor and capital employed in
the production of the corn or iron. England obtains
more corn or iron than it could have produced for
itself by means of the same labor and capital
employed in the fabrication of the cotton cloth.
Exchanges of this sort constitute the basis ofcommerce. (Anon. 1814, 8-9)
Denoting the input coefficient for the production of𝑗
one unit of good 𝑖 in country 𝑗 by 𝑎𝑖 (> 0) and agiven labor-cum-capital commonly employed in any
production in both countries by 𝐿̅ (> 0 ), let the𝑗output be given as 𝐿̅⁄𝑎𝑖 . In the example, England (𝐻)has absolute advantage over Germany ( 𝐹 ) in
producing cotton cloth ( 𝑋 ), 𝐿̅⁄𝑎𝑋𝐻 > 𝐿̅⁄𝑎𝑋𝐹 or
𝑎𝑋𝐻 < 𝑎𝑋𝐹 , while there is indifference advantage inproducing iron ( 𝑀 ) between both countries,
𝐻
𝐹
𝐻
𝐹
𝐿̅⁄𝑎𝑀
= 𝐿̅⁄𝑎𝑀or 𝑎𝑀= 𝑎𝑀. According to the author,
even in the case that England and German specializein the production of cotton cloth and iron, respectively,
and exchange their goods, both countries might gainfrom trade. It is a fact that this explanation, although
not necessarily satisfactory, must be based oncomparative advantage.
Might Torrens, who hated plagiarism (Torrens 1833,57-8), have borrowed the principle of comparativeadvantage presented in the Considerations? There is
no reference to Considerations in the third edition ofExternal Corn Trade. His silence implies that,
although he read it, at the time he did not notice orunderstand the principle.99Considering that the first edition “was written in 1814”(Torrens 1826, ix), it is difficult to interpret that Torrens
understood the discussion of comparative advantage in the

4.2 Torrens and James Mill’s 1826 Elements
Torrens, as it is known, was keen to establish his claim
for priority of theory and had read all the editions ofRicardo’s Principles. However, his first claim
appeared not in the 1819 but in the 1826 edition of his
External Corn Trade, that is, nine years after the
publication of Ricardo’s 1817 text. This explains
Torrens’ 1815 incomprehension of comparativeadvantage and shows that he learned of it from
Ricardo’s text. When and from what did he learn it?
The third edition, the greatly revised version of theformer, simply mentioned a comparative advantage
theory in the preface, with a small alteration of thephrase from “excess of profit” to “excess of produce”
in the sentence in question. We can guess that hegrasped the comparative advantage theory before
writing the preface of the third edition, dated February
2, 1826. Torrens (1826, xv) was aware of “the last[third] edition” of Mill’s Elements.
There is his refutation of Mill’s new explanation of
the relationship between wage and profit rates overthree pages in the preface (xiv-xviii). It is plausiblethat his attention was directed to Mill’s correction ofgains from trade, too. As Section II pointed out, Mill’scorrection implicitly meant the presentation of thepattern of specialization, to which Torrens
ambiguously referred in the preface.10
4.3 Torrens and Pennington’s criticism of Mill
However, we cannot reject the hypothesis that
Pennington helped Torrens understand the principle ofcomparative advantage. His criticism of Mill’s 1821
error of attributing all the gain to one of two countries
was published in the “letter on the Importation of
Foreign Corn, and the Value of the Precious Metals in
different countries (…) written in the early part of lastyear [1839],” which is included in the 1840 Letter toFinlay (Pennington 1840, Advertisement). However,anonymous pamphlet that appeared the same year and applied it
properly in his forthcoming text.
10
Torrens had read the first edition of Mill’s Elements and hisreview of it appeared in his own newspaper The Traveller(Torrens [1822] 1936). His book review shed light on Mill’svalue but not on his trade.

Torrens’ Principles of Comparative Advantage and Gain-from-trade
9

Torrens had read the unpublished writing long before
the publication.11 In his “Advertisement for the Fourth
Edition” dated February 3, 1827, he argued: “While
investigating the principles which regulate the value ofmoney when the material of which it is composed is aforeign product, I received much assistance from avery curious and elaborate Critique by Mr. Pennington,
upon some doctrines connected with this subject,which had been advanced by Mr. Ricardo and Mr.
Mill.”
Pennington (1840, 40-3) proposed the comparativeadvantage theory and a crude version of the theory ofreciprocal demand (see Viner 1937, 446). After the
publication of the third edition, Torrens, less than ayear later, published the fourth edition, which added
only one section to the former edition. This section
included Torrens’ numerical example of comparativeadvantage and his reference to the terms of tradedepending on “the proportion which exists between
the demand for foreign commodities in the homemarket, and the demand for domestic commodities inforeign markets,” which was written under the
influence of Pennington’s ideas. In early 1826, Torrens
could learn, whether directly or indirectly, from Mill’s
text and Pennington’s unpublished writing.12
5. Torrens’ Revocation and His New Claim
5.1 The 1843 Postscript
In his Postscript to a Letter to Peel, dated April 22,
1843, Torrens stated: “In a volume upon the Corn
11

Gehrke (2015, 21) believes Pennington’s writing “might
have been already in 1825.”
12
Torrens later stated: “In the view of the question presented by
Mr. Ricardo, the advantages derived from foreign Trade wereconfined to only one of these countries. Mr. Ricardo’s error wascorrected by Mr. Pennington; and the correction, if I rightly
remember, was adopted by Mr. James Mill in the third editionof his Principles [Elements] of Political Economy” (Torrens
1857, xvi). De Vivo (2000a, xxii) points out: “As Sraffa has
shown, Torrens got it completely wrong. Ricardo never madesuch a mistake [“that the advantage would be entirely reaped byonly one country” (xxi)]; a mistake was made by Mill in thefirst edition of his Elements (1821), and corrected in the third(1826), following criticisms from his son and his study group[Ellis and Graham]; Pennington’s correction came when Mill
had already corrected his mistake.” See also Sraffa (1930, 543)
and Viner (1937, 445-6).

Trade, first published in 1815 (…), I propounded thesame identical principles regarding international
exchange and the distribution of the precious metals,
which (…) are involved in Mr. Ricardo’s chapter upon
Foreign Trade” (Torrens 1843a, 3-4). Rather thanbeing a determinant of the pattern of specialization,
this claim, unlike the one in 1826, pertains to theprinciple “that productive cost is the regulator of
exchangeable value as regards the commodities of thesame country, and not as regards the commodities ofdifferent countries.”
He argued:
It is a law universally admitted that theexchangeable value of all commodities, whether
produced in the same country, or in different
countries, is determined by the relation of demand
to supply. But there is an important difference, as
regards the effect of demand and supply uponexchangeable value, between the commodities
which are produced in different countries. In thesame country, the cost of production adjusts therelation of demand and supply, and, consequently,
becomes the ultimate regulator of exchangeablevalue with respect to all those domestic
commodities which are not subject to monopoly;
while, as regards different countries, cost of
production has a slight, and frequently animperceptible influence in adjusting supply todemand; consequently, cannot be regarded as theultimate principle which regulates the terms ofinternational exchanges. (4-5)
As to the reason the terms of international tradecannot be regulated by the production cost theory,
Torrens said:
When commodities produced, at equal cost, in thesame vicinity, are brought to market in suchproportions as to render them of unequal value inexchange, then labour and capital can be transferredwithout much difficulty from the production of theleast valuable, to the production of the mostvaluable articles, until, from the diminishing supplyof the former, and the increasing supply of the latter,
their exchangeable value becomes proportionate toTorrens’ Principles of Comparative Advantage and Gain-from-trade10

their productive cost. As regards different countries,
this equalizing transference of labour and capital isalways difficult, and frequently impracticable. (5)Torrens also states, in his England-Cuba model, that“the difference of language, of religion, and of climate,would interpose an insuperable obstacle to such atransference of labour from England to Cuba, as would
cause the international exchange of commodities to be
ultimately determined by productive cost” (5-6).
According to him, the immobility of the factors is
attributed not only to the geographical matter of the
distance between nations, but also to the distinctive
characteristics of the factors, or the so-called “specificfactors.”
Hence, Torrens argued that the terms ofinternational trade depended on “the reciprocal
relations of demand and supply” (6) on the ground of
the immobility of capital and labor between nations.
The determination of the terms was, according to him,“regarded as forming the most important branch of
economical science,” (4) which then was his object ofinterest.

country, does not regulate the value, in relation to eachother, of commodities produced in different countries,”from which Torrens “deduced” the conclusions
regarding international trade (14), and “the doctrine
regarding the distribution of the precious metals
propounded by Ricardo” (8), or more specifically, “thedoctrine regarding the local value of money,
established by Ricardo, illustrated by [James] Mill,and borrowed by myself [Torrens]” (7).
Torrens’ Letter was his reply to the criticism ofSenior’s 1843 Edinburgh Review article (Senior 1843).
“In entering upon a conflict in defence of the
discoveries of Ricardo,” Torrens (1843b, 14) adopted“the precaution of placing Ricardo himself in the frontof the battle” against Senior, favorably citing Ricardo’s
chapter on foreign trade (see De Vivo 2000b, xxii).
The critical points were as follows:I maintain, that the terms of international exchange
are regulated not by cost of production, but by
demand and supply; you maintain that they are
regulated not by demand and supply, but by cost of
production. My position is that the relative value of
foreign commodities is regulated by a different rulefrom that which regulates the relative value ofdomestic commodities; your position is that therelative value of domestic commodities, areregulated by one and the same rule. (Torrens 1843b,
14)

5.2 The 1843 Letter to Senior
J. S. Mill’s System of Logic appeared in 1843, the year
Torrens wrote the Postscript. The following year, theBudget was published with “An Introduction, in which
the Deductive Method, as Presented in Mr. Mill’s
System of Logic, is Applied to the Solution of Some
Controverted Questions in Political Economy.” In it,
Torrens (1844, xxi) atoned for his poor behavior
toward his “great master” Ricardo. He acknowledged,“I indulged the self-delusion, that while employing
Ricardo’s indestructible machine in manufacturing awider fabric than the pattern he presented, I was
creating the instrument I borrowed” (xvi).
In his Letter to Senior, dated November 17, later
included in the 1844 Budget, Torrens recanted his
previous claim. The “principles of international
exchange which I [Torrens] had borrowed from
Ricardo” (1843b, 4) indicate the following: “theprinciple propounded by Ricardo, that cost of
production, while it regulates the value, in relation toeach other, of commodities produced in the same

Torrens was at that time interested in the terms of trade
question rather than in the determinant of the patternof specialization. J. S. Mill published the essay, clearlyputting forward the theory of international
exchangeable value by means of the concept of what
we now call “offer curve.”[T]he controversies excited by Colonel Torrens’
Budget have again called the attention of political
economists to the discussions of the abstract science(…) and (…) the first paper relates expressly to thepoint upon which the question at issue between
Colonel Torrens and his antagonists has principally
turned. 13 From that paper it will be seen that
13Mill already had an interest in the question. In the meeting onTorrens’ Principles of Comparative Advantage and Gain-from-trade11

opinions identical in principle with thosepromulgated by Colonel Torrens (there would
probably be considerable difference as to the extent
of their practical application) have been held by thewriter for more than fifteen years: although hecannot claim to himself the original conception, but
only the elaboration, of the fundamental doctrine of
the Essay. (Mill 1844, iii)
In the meeting of the Political Economy Club held on
December 5, 1844, members discussed the question,“Was Ricardo correct in stating that ‘the same rule
which regulates the relative cost of Commodities in
one country, does not regulate the relative value of theCommodities exchanged between two or morecountries?’” (Political Economy Club of London 1921,57). This was Torrens’ question; however, owing to hisabsence, Mill presented it instead (291). This showsthey shared their interest in the terms-of-trade
subject.14
5.3 The re-publication of The Economists Refuted
In the later tracts on Finance and Trade, Torrens (1852,17) again referred to “Mr. Ricardo’s great work on
Political Economy and Taxation,” restating “thatprofound and original writer propounded, for the firsttime, the true theory of international exchange” in “hischapter upon foreign trade.”15
May 6, 1841, he had proposed the question: “According to what
principle is the benefit of the Trade between two nations shared
between two nations?” (Political Economy Club of London
1921, 52). Moreover, there was a difference in how Torrens andMill defined “demand.”
14
However, they did not necessarily share the same theory of
the terms of trade, that is, the same theory of reciprocal demand,
because they defined “demand” differently. (Political Economy
Club of London 1921, 52).
15
According to Torrens (1852, 17-18), it was Ricardo who first“showed that the relative value of the commodities produced indifferent countries is not determined, like the relative value ofcommodities produced in the same country, by the cost of
production; that a country possessing peculiar advantages in the
production of commodities extensively demanded in othercountries obtains, in exchange for the produce of any given
quantity of its labour, the produce of a greater quantity offoreign labour.” Viner (1937, 444) argues that “Torrens, it is true,
apparently has reference here rather to the terms of trade

On the other hand, Torrens (1857, xv-xvi), in
re-publishing his early pamphlet entitled The
Economists Refuted, made a new claim:
I (…) explained, I believe, for the first time, thenature and extent of the advantages derived fromtrade. The principles which I propounded in ‘The
Economists Refuted,’ Mr. Ricardo subsequently
adopted in his great work on Political Economy andTaxation; and as my previous publication has beenlong out of print and forgotten, it was generally
believed that it was reserved for Mr. Ricardo (…) toshow that the benefit resulting from foreign tradeconsists of the increased production created byinternational divisions of employment. I had shownthat the increased production thus created was
divided, in variable proportions, between the
countries exchanging their respective productions.
Consistent with Smith, Torrens ([1808] 1993) had
stated that the “expectation of being able to exchange
the articles which they do not want, for other articles
that they stand in need of, induces men to divide theirlabour” and thus to “augment, to an astonishing degree,
the productiveness of industry (31).” He argued that“as it is the home trade that gives rise to the homedivisions of labour, so it is [that] foreign trade orcommerce that gives rise to foreign divisions of labour(31-2),” and thus “commerce, by establishing divisionsof labour between the individuals of different nations,is a means of augmenting wealth (34).” 16 As
Yoshinobu (1991, 36) points out, when Torrens thus
mentioned that the gains consist of the increased
production created by international divisions of labor,
he had in mind the augmented amount of enjoyableuse value. With the England-France example, Torrens([1808] 1993, 34-5) had demonstrated that the gains
from foreign trade were “always reciprocal.”When England manufactures a surplus quantity ofcloth, and exchanges it with France for wine, shequestion than to comparative costs, but he had also claimed
priority with respect to [the] terms of doctrine.”
16
The term “wealth” was defined by the “articles which supply
our wants, and gratify our desires” (Torrens [1808] 1993, 1).

Torrens’ Principles of Comparative Advantage and Gain-from-trade
12

obtains more wine than she could have obtained bycultivating the grape at home. But, in thistransaction, the gain of England is not the loss ofFrance. On the contrary, France has made anaccession to her wealth. In exchange for her wine
she has acquired a greater quantity of cloth than she
could have acquired by converting her vineyards
into sheep-walks, and manufacturing wool at home.
“But,” he stated, “although the advantages ofcommerce are reciprocal, yet it does not follow thatthey should be equal.” That is, “When countries
exchange their commodities, each may be benefited,but each in a different degree” (35).
Torrens explained the way “to estimate the extent of
the benefit which foreign trade confers” (35-6) with a
two-country, two-good model. In order “to know theextent of the advantage, which arises to England, fromher giving France a hundred pounds worth of broad
cloth, in exchange for a hundred pounds worth of lace,”
we have to “take the quantity of lace which she has
acquired by this transaction, and compare it with thequantity which she might, at the same expense oflabour and capital, have acquired by manufacturing it
at home” (37).17 That is, using the input coefficient𝑗𝑎𝑖 (> 0), Torrens’ method can be explained as follow.
When England ( 𝐻 ) exports 𝐿̅⁄𝑎𝑋𝐻 units ofbroadcloth (𝑋) produced with a given 𝐿̅ (> 0) of its
𝐹labor and import 𝐿̅⁄𝑎𝑀
units of lace produced withthe same quantity of labor in France (𝐹), England’s𝐹
gains from this trade can be calculated as 𝐿̅⁄𝑎𝑀
units
𝐻
of imported lace (𝑀) minus 𝐿̅⁄𝑎𝑀 units of lace that
England could produce with the same quantity of𝐹𝐻)𝐻𝐹 ⁄ 𝐻 𝐹labor: 𝐿̅(1⁄𝑎𝑀− 1⁄𝑎𝑀= 𝐿̅(𝑎𝑀− 𝑎𝑀) 𝑎𝑀 𝑎𝑀 . 18
𝐹
On the other hand, when France exports 𝐿̅⁄𝑎𝑀
unitsof lace produced with a given 𝐿̅ of its labor andimports 𝐿̅⁄𝑎𝑋𝐻 units of broadcloth produced with thesame quantity of English labor, France’s grains can becalculated as 𝐿̅⁄𝑎𝑋𝐻 units of imported broadcloth
17

As Fujimoto (1994, 77) points out, Torrens here considered
English broadcloth and French lace to be the result of the same
costs of production (the same sets of labor and capital) and thus
they have the same exchangeable value represented by £100.
18
More exactly, gains were an amount of use value of theaddedquantityof
goods
derivedfromtrade:𝐻
𝐹 ⁄ 𝐻 𝐹𝐻̅𝑢 = 𝑢(𝐿(𝑎𝑀 − 𝑎𝑀 ) 𝑎𝑀 𝑎𝑀 ).

minus 𝐿̅⁄𝑎𝑋𝐹 units of broadcloth that France could
produce with the same quantity of labor: 𝐿̅(1⁄𝑎𝑋𝐻 −1⁄𝑎𝑋𝐹 ) = 𝐿̅(𝑎𝑋𝐹 − 𝑎𝑋𝐻 )⁄𝑎𝑋𝐻 𝑎𝑋𝐹 . Thus, the gains from𝑗trade depend upon the productivity (1⁄𝑎𝑖 ) or technical𝑗conditions (𝑎𝑖 ) in both countries. Torrens states: “The
only way, therefore, of ascertaining the amount of thebenefit derived from commerce, is to ascertain the
degree in which the foreign divisions of labouraugment the productiveness of human industry (37).”
Trade must confer positive gains for both countries.
𝐻
𝐹 )⁄ 𝐻 𝐹
That
is,
𝐿̅(𝑎𝑀
− 𝑎𝑀
𝑎𝑀 𝑎𝑀 > 0
and
𝐹
𝐻
𝐻
𝐹
𝐿̅(𝑎𝑋 − 𝑎𝑋 )⁄𝑎𝑋 𝑎𝑋 > 0. In so doing, it must satisfy
𝐻𝐹
the condition, 𝑎𝑀> 𝑎𝑀
and 𝑎𝑋𝐹 > 𝑎𝑋𝐻 , which meansthat France has an absolute advantage in producing
lace and England has an absolute advantage in𝐹⁄ 𝐻
producing broadcloth. However, even if 𝑎𝑀
𝑎𝑀 <
𝐹⁄ 𝐻
𝐻
𝐹
𝐹
𝐻
𝑎𝑋 𝑎𝑋 , the condition, 𝑎𝑀 > 𝑎𝑀 and 𝑎𝑋 > 𝑎𝑋 , is notnecessarily realized. Therefore, his 1808 theory ofgains from trade holds only under the condition ofabsolute advantage. Torrens himself recognized thefact and never tried to claim priority of his discoveryof comparative advantage. His “object” of there-publication was “to claim” his “right to be regarded
as the original propounder” of the “theory of the natureand the extent of the advantages derived from foreign
trade” which he “ventured to present to the public
forty-nine years ago” (Torrens 1857, xvi).
Unfortunately, his claim should be rejected, because
his theory was constituted only by what was alreadyknown to eighteenth-century economists; that is, the“eighteenth-century rule.” However, this is not amatter of importance. Rather, what is important is that
notable economists in the future would confuse theclaim to the priority of gain-from-trade theory withthat of comparative advantage.
The re-published pamphlet was a supplement to the1857 edition of The Principles and Practical
Operation of Sir Robert Peel’s Act of 1844, with thearticle “A Critical Examination of the Chapter ‘On theRegulation of a Convertible Paper Currency’ in Mr. J.
S. Mill’s Principles of Political Economy.” Theprovocative title tempted Mill to read this book. Mill
(1965, 589) footnoted the explanation of comparativeadvantage in the chapter on international trade in thefifth edition of the Principles of Political Economy
thus:Torrens’ Principles of Comparative Advantage and Gain-from-trade13

I at one time believed Mr. Ricardo to have been thesole author of the doctrine now universally received
by political economists, on the nature and measureof the benefit which a country derives from foreign
trade. But Colonel Torrens, by the republication of
one of his early writings, “The Economists Refuted,”
has established at least a joint claim with Mr.
Ricardo to the origination of the doctrine, and an
exclusive one to its earliest publication.
This footnote to the explanation of comparativeadvantage handed down to posterity themisinterpretation that Torrens’ new claim pertained tocomparative advantage and not to the gain-from-trade
theory. The impact of Mill and his text onnineteenth-century economics possessed sufficient
power to trigger debate on who was the true father ofcomparative advantage: Ricardo or Torrens? This great
controversy commenced in the authoritative The
Economic Journal published under editor Francis
Ysidro Edgeworth (1845-1926), who was one of thefirst economists mathematically to illustrate thedetermination of the exchange ratio with an offer
curve diagram.

6. Concluding Remarks
In Torrens’ two-country, two-good model ofcomparative advantage, (i) the four numbers given are
input coefficients of labor employed in the productionof one unit of good, (ii) the production factor isassumed to be immobile between nations, (iii) thegains from trade consist of use value (utility) includedin the increased production created by the international
division of labor, (iv) both countries’ reciprocal gains
require the condition that there exist the terms of tradein an open interval between both countries’
opportunity costs, and (v) the terms of trade can be
determined by “the proportion which exists between
the demand for foreign commodities in the homemarket, and the demand for domestic commodities inforeign markets,” or by demand and supply. Torrens
model
differs
from
Ricardo’s
famousEngland-Portugal model, but is similar to the modern
Ricardian model.

All Torrens’ claims to international trade theories
are associated with the issue of priority for enunciating
the concept of comparative advantage. As Ruffin
points out, J. S. Mill unintentionally gave a boost to
the myth of Torrens’ discovery of comparativeadvantage by reporting his claim with respect to thegain-from-trade theory. In the authoritative The
Economic Journal edited by Edgeworth, a great
controversy arose over the discovery of thecomparative advantage question between two famoustwentieth-century economists, Seligman and Hollander.
The important point is not the question of who is thetrue father of comparative advantage. Rather, it isabout the attention the debate attracted fromdistinguished international trade theorists, such as
Haberler and Viner, as well as notable
twentieth-century economists, such as Schumpeter,
Robbins and Samuelson. They believed that Ricardo,
in his text, proposed the same principle of comparativeadvantage as Torrens had presented ― namely, theRicardian model presented in modern international
economics textbooks.
There is a myth that the principle of comparativeadvantage known as the Ricardian Model was
Ricardo’s handiwork. Torrens was complicit in thedissemination of this erroneous interpretation.

Torrens’ Principles of Comparative Advantage and Gain-from-trade
14

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