Comparative Advantage in International Trade: A Historical Perspective

Abstract

Comparative in International Trade: A Historical Perspective By Andrea Maneschi. Cheltenham, UK: Edward Elgar, 1998. Pp. x, 258. $85.00. Andrea Maneschi has been the leading intellectual authority on the history of international trade theory for many years. This book further crystallizes his reputation. Comparative in International Trade is a remarkable book for its clarity, scope, and authoritative style. It is immediately apparent to the reader that Maneschi is fully versed in modern and historical trade theory. story of the development and criticism of comparative advantage is woven into an intriguing and complete statement that begins with the ancient Greeks and ends with the linkage between comparative advantage and the new trade theory. After a brief introductory chapter, Maneschi wastes no time in letting the reader know that this book is written primarily for an advanced audience. Chapter 2, The Concept of Comparative Advantage develops a well-crafted expose on the meaning, causes, and limits of comparative advantage. What will be of interest to economists not well versed in trade theory is just how limited the concept of comparative advantage is once it is expanded beyond the familiar 2X2X2 framework. Maneschi demonstrates that the general law of comparative advantage is not able to say that if country A has a comparative advantage in good I then country A exports good 1. [A]ll that one can claim ... is that a country's net imports are positively correlated with the differences between the autarky prices in that country and in its trading partner. . .. Thus, a country tends to import commodities whose autarky prices are higher there than elsewhere, and vice versa (p. 10). law of comparative advantage holds as a law of tendencies but is silent with respect to trade in any particular good. Chapter 3, Theories of International Trade up to Adam Smith, begins the story of how the profession arrived at the main theorems laid out in the previous chapter. Again, what will be of most interest to the general reader is that trade flows were analyzed in a manner consistent with the notion of comparative advantage well before Ricardo's and Torren's statements in the early nineteenth century. For example, Josiah Tucker developed an argument that has a surpassingly modern tone. High wage countries need not worry about competition in trade with low wage countries because high wages are the result of more skilled and productive labor. He went on to develop a theory of trade between richer and poorer countries. Tucker theorized that there exists a positive correlation between a country's level of development (read wages) and its competitiveness in goods that require more complex production processes. As he states the case, operose or complicated Manufactures are cheapest in rich Countries;-and raw Materials in poor ones: And therefore in Proportion as any Commodity approaches to one, or other of these Extremes, in that Proportion it will be found to be cheaper, or dearer in a rich, or a poor Country... (p. 32). David Hume followed up on this line of reasoning in his famous essay Of the Jealousy of Trade, written around 1758. A concern of many of his contemporaries was that one country's technological advances could create such imbalances that no other country could hope to compete with it in international markets. Hume's answer was that as neighboring countries advance, new demands are created for the products of other countries. These two examples serve to demonstrate that thinking was developing along comparative advantage lines before Adam Smith. What about Smith and trade? Did he say anything useful regarding the determination of trade flows, or should his thoughts on trade be shut off from the public as an embarassing serviving relic of the Mercantile Theory, as J.S. Mill wrote? Maneschi's answer is that Smith's contribution to the development of trade theory is much more important than is generally observed. …