Comparative Advantage

CHAPTER 1 Introduction The role of comparative advantage has great importance in guiding international trade and commerce. The closed economies which create bathetic barriers to trade and commerce hardly benefit by prosecute such restrictive policies. It is a proven fact that by regulating trade and commerce it is not possible to augment the quantity of assiduity in any society beyond what its capital can maintain. It can at best command a part of it into channels into which they might not attain some otherwise gone. But the efficiency of the deployment of scarce resources cannot be guaranteed in this artificial manner. In an economy which is purely driven by ideological considerations such distortions are not common and political objectives override economic pragmatism. The economic gains are sacrificed for some other political objectives. In its zeal to develop a independent economy, it diverts vital, productive resources into industries in which it neither possess the right applied science nor the efficient labour to ensure an efficient deployment. It could return advantageously outsourced the goods nonplusd by such industries from other countries which hold comparative advantages. The earlyish logic that free trade could be advantageous for countries was base on the concept of absolute advantages in production.

But as trade evolved, ideologies and theories changed. Adam Smiths observations from The Wealth of the Nations are expense quoting in this context: What is prudence in the conduct of mysterious family can scarce be folly in that of a great kingdom. If a foreign country can allow for us with a commodity cheaper than we ourselves can make it, erupt buy it of them with some part of the produce of our own industry employed in a way in which we have some advantages. The general industry of the country, being always in proportion to the capital which employs it, will not thereby be diminished. The idea here is simple and intuitive. If our country can produce some... If you want to get a full essay, order it on our website: Ordercustompaper.com

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