This theory does not measure a nation's wealth by how much gold and silver it has on reserve, but by the living standards of its people. Countries increased their standards of living by trading with other nations to obtain goods they would otherwise not have, or to get more of a good because of gains from specialization. The theory of absolute advantage shows that trade is a positive-sum game in that both parties to a trade arrangement can benefit. Comparative Advantage Comparative advantage is the inability of a nation to produce a good more efficiently than other nations, but an ability to produce that good more efficiently than it does any other good. In other words, trade between two nations is still beneficial even if one country is less efficient in the production of two goods, so long as it is less inefficient in the production of one of the goods.
Comparative advantage is also concerned with productivity.
Countries are driven only by the maximization of production and consumption. There are only two countries engaged in the production and consumption of just two goods. There are no costs of transporting traded goods from one country to another. Labor is the only resource in the production process. Specialization in the production of one particular good does not result in gains in efficiency.