INR 2001 Chapter Notes - Chapter 10: International Political Economy, Franklin D. Roosevelt, Comparative Advantage

• School: University of Florida
• Department: Political Science
• Course: INR 2001
• Professor: Paul D’ Anieri

Document Summary

Key economic concepts and theories: three basic questions: Who gets the benefits of trade: the theory of comparative advantage. Theory of comparative advantage: a theory developed by the. English economist david ricardo to show logically how and why trade is beneficial to both partners. The basic point is that by specializing and trading, states and individuals can increase overall consumption and efficiency. The key question is: how much labor must be diverted from one sector to produce more in the other? . The difference in relative prices creates the basis for profitable trade. With specialization, the overall amount of production and consumption increases without any increase in inputs. Specialization and trade lead to increased consumption in both countries. States trade because trading allows them to produce and consume more and because it leads to greater overall efficiency: comparative advantage and liberalism. Comparative advantage is closely linked to the liberal approach to international relations theory.