The theory of absolute advantage by the great Economist Adam Smith which states that the nation should produce the commodity in which it has absolute advantage and then import the commodity in which it doesnt have so. By doing so the world economies would benefit from trade .
Later David Ricardo came up with thought in his book "Principles of Political Economy and Taxation in 1817 that even tough any country do not have the absolute advantage but it still can gain by trade if it has comparative advantage in a good than that of other so it can gain by using both factors of production (L,K) in making of the good and trade .Import in which the one has comparatively more disadvantage.
Economist Haberler Explained the comparative advantage theory in context with opportunity cost based Returns of scale. 1: constant return case, 2: Diminishing return to scale case, 3: increasing returns to scale.
The above are the basic theories for the scholar of International trade , which more or less talks and takes it for granted that trade results in Welfare of the economies . But in the 21st century today one more group of economist is coming up which takes a different view on it. When we talk about third world nations , developing countries and the countries which are not tech savvy yet the scene totally changes as they cant compete in the same manner . If we consider the crude oil as an exception then third world nations have not gained much from the trade and the gap between developed and developing nations is increasing in this era of technology!
Economist Haberler Explained the comparative advantage theory in context with opportunity cost based Returns of scale. 1: constant return case, 2: Diminishing return to scale case, 3: increasing returns to scale.
The above are the basic theories for the scholar of International trade , which more or less talks and takes it for granted that trade results in Welfare of the economies . But in the 21st century today one more group of economist is coming up which takes a different view on it. When we talk about third world nations , developing countries and the countries which are not tech savvy yet the scene totally changes as they cant compete in the same manner . If we consider the crude oil as an exception then third world nations have not gained much from the trade and the gap between developed and developing nations is increasing in this era of technology!
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