RICARDO AND THE CONSTRUCTION OF THE ‘RICARDIAN’ TRADE MODEL OF COMPARATIVE ADVANTAGE

Abstract

This paper examines the historical movement of Ricardo’s original theory of comparative advantage as described by Yukizawa, Ruffin and Maneschi, to the two-by-two Ricardian trade model presented in textbooks. James Mill introduced the use of fixed input coefficients into the two-country, two-good model with four magic numbers. Pennington, Torrens and John Stuart Mill later drove this practice forward, such that the four numbers indicated constant input coefficients that expressed the productivity of each country in autarky; the comparative costs calculated by these numbers represent domestic prices and, between these prices, the world price is determined by supply and demand.