Comparative Advantage: An Idea Whose Time Has Passed

Comparative Advantage: An Idea Whose Time Has Passed by Michael Munger, Foundation For Economic Education

Many economists will tell you that the most important principle in economics is comparative advantage — the idea that it is expensive to grow oranges in Alaska or to flood rice paddies in Saudi Arabia, so Alaska and Saudi Arabia should import oranges and rice, respectively, and base local production on the advantages of local conditions. We got this idea from classical economist David Ricardo, who famously observed in 1821 that England and Portugal would both be wealthier if Portugal exported its wine and imported England’s textiles, and vice versa.

Ricardo’s principle even demonstrated the advantages of trading with those who are less...