Comparative advantage | Wikipedia audio article
Channel: wikipedia tts
Date: 2019-01-03

This is an audio version of the Wikipedia Article:
https://en.wikipedia.org/wiki/Comparative_advantage


00:01:48 1 Classical theory and David Ricardo's formulation
00:03:35 1.1 Ricardo's example
00:06:01 1.2 Ricardian model
00:18:21 1.3 Terms of trade
00:19:13 2 Haberler's opportunity costs formulation
00:20:16 3 Modern theories
00:21:19 3.1 Dornbusch et al.'s continuum of goods formulation
00:22:36 3.2 Deardorff's general law of comparative advantage
00:23:36 3.3 Alternative approaches
00:25:24 4 Empirical approach to comparative advantage
00:26:44 4.1 Direct test: natural experiment of Japan
00:29:10 4.2 Structural estimation
00:30:16 4.3 Earlier empirical work
00:32:46 5 Considerations
00:32:55 5.1 Development economics
00:34:50 6 Criticism
00:40:03 6.1 Unrealistic assumption 1: capital and labour are not internationally mobile
00:42:47 6.2 Unrealistic assumption 2: there are no externalities
00:44:31 6.3 Unrealistic assumption 3: productive resources move easily from one industry to another
00:45:32 6.4 Unrealistic assumption 4: the gains resulting from international trade are only static gains
00:47:44 6.5 Unrealistic assumption 5: trade will always be balanced and there is an adjustment mechanism
00:50:18 6.6 Unrealistic assumption 6: international trade is understood as bartering
00:52:17 6.7 Unrealistic assumption 7: labour or capital is used to its full potential
00:54:45 7 See also



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SUMMARY
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The law or principle of comparative advantage holds that under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage. Comparative advantage is the economic reality describing the work gains from trade for individuals, firms, or nations, which arise from differences in their factor endowments or technological progress. In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. One does not compare the monetary costs of production or even the resource costs (labor needed per unit of output) of production. Instead, one must compare the opportunity costs of producing goods across countries.David Ricardo developed the classical theory of comparative advantage in 1817 to explain why countries engage in international trade even when one country's workers are more efficient at producing every single good than workers in other countries. He demonstrated that if two countries capable of producing two commodities engage in the free market, then each country will increase its overall consumption by exporting the good for which it has a comparative advantage while importing the other good, provided that there exist differences in labor productivity between both countries. Widely regarded as one of the most powerful yet counter-intuitive insights in economics, Ricardo's theory implies that comparative advantage rather than absolute advantage is responsible for much of international trade.