Comparative Advantage in Smith's "Wealth of Nations" and Ricardo's "Principles": a Brief History of its Early Development

Abstract

The present paper delves into the writings of three thinkers on the theory of comparative advantage: Henry Martyn, Adam Smith, and David Ricardo. Martyn’s writings, by introducing what later was called «the eighteenth-century rule», prepared the path of transition from absolute advantage to comparative advantage as the basis of trade. Smith provided a description of comparative advantage outcome by observing that a poor country can rival a rich country in agricultural goods despite having an absolute disadvantage in both manufacturing and agricultural goods. The present paper focuses particularly on Smith because he has not received the attention he deserves in the literature on comparative advantage. In this intellectual odyssey, Ricardo plays the seminal role with his famous example of England exchanging cloth for Portuguese wine.