Abstract
The so-called modern interpretation of Ricardian theory of comparative advantage results in the drastic conclusion that each country (England or Portugal) specializes entirely in the production of a single commodity (cloth or wine). But Ricardo himself was merely concerned with marginal adjustments of production to the given terms of trade in his famous theory of gains from foreign trade. Ricardo has nothing to do with the complete specialization. It was J. S. Mill, however, who used the assumption of the complete specialization skillfully to determine the terms of trade uniquely in his theory of the reciprocal demand. Classical economists, including Bastable and W. T. Thornton, critically discussed many important aspects of Mill’s theory, but they did not seem to raise the objection to Mill’s assumption of entire specialization. It was Pareto, a neoclassical economist, who presented a numerical example for which the assumption is inappropriate.
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Notes
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- 2.
If you are a drunkard who measures GNP in terms of wine, a real per-capita GNP in Portugal is 1∕2 greater than in England since \(1/2 = (120 - 80)/80\). Similarly, if you are a dandy, it is 1∕9 greater since \(1/9 = (100 - 90)/90\).
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- 8.
Therefore, my previous argument (Negishi 2001, pp. 56–57) should be amended in this respect.
- 9.
An example of the production possibility line is line B 1 A 1 in Fig. 19.1.
- 10.
See, for further details, Chipman (1965, pp. 488–489).
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Acknowledgments
It is my great honor and pleasure to contribute my paper to this Festschrift for Professor Ian Steedman, with whom I have shared a common interest in the history of economics and international trade theory. I remember, with many thanks, his review of my book (Steedman 1995). I would also like to thank an anonymous reviewer for their comments.
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Negishi, T., Negishi, T. (2014). Complete Specialization in Classical Economics. In: Developments of International Trade Theory. Advances in Japanese Business and Economics, vol 2. Springer, Tokyo. https://doi.org/10.1007/978-4-431-54433-3_19
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