POL208Y1 Lecture Notes - Lecture 14: Barter, Voluntary Export Restraints, Protectionism
Document Summary
This affects which approach we take to look at different issues. Ricardo doesn"t believe absolute advantage is so clear-cut corporation is not necessarily invaluable relaxed the conditions under which trade is beneficial introduces relative gains. There is still benefit to be gained from specialization. As long as there are two goods, and as long as the production of the two goods vary between the two actor relative advantage can exist. More countries should be trading/more should be specializing. All countries should trade even if its relative advantage general welfare will increase for all. However, throughout history protectionism is much more prevalent than liberalism. According to ricardo, everyone benefits from trade. In absolute terms trade is beneficial but in relative gains the benefits are ambiguous. Transaction costs: cost of trade (including transportation but also risk etc. ) Opportunity costs: amount of some other good that is lost in order to obtain unit of given good.
