What is the view of classical international trade theory

The classical theory of international trade is the idea that labor productivity's can account for the causes, structure, and distribution of benefits that arise from international trade.?

Classical international trade theory mainly includes Adam Smith's theory of absolute advantage and David Ricardo's theory of comparative advantage

In the Study of the Nature and Causes of National Wealth (Wealth of Nations), Smith pointed out that the basis of international trade lies in the existence of absolute differences in the productivity of labor and the cost of production between the goods of various countries, and that such differences arise from the natural endowments and acquired conditions of production.

Adam Smith believed that in the international division of labor, each country should specialize in the production of products in which it has an absolute advantage and exchange some of them for products in which it has an absolute disadvantage, which would make the most efficient use of the resources of each country, better promote the division of labor and exchange, and maximize the benefits for each country.

Ricardo believes that the basis of the division of labor in international trade is not limited to absolute cost differences, even if a country in the production of all products in the labor productivity are in a position of full advantage or full disadvantage, as long as the degree of advantage or disadvantage is different, the country can participate in international trade through the production of labor productivity differences in the product of the smaller, so as to obtain comparative advantage.

The theory of comparative advantage follows the principle of "taking the greater of the two advantages and the lesser of the two disadvantages", and believes that the relative differences in the level of technology between countries produce differences in comparative costs, which constitutes the cause of international trade, and determines the pattern of international trade.

Expanded Information:

1. p>1, absolute advantage theory

The theory can be regarded as the earliest theory explaining the reason for the emergence of international trade, it is the first time to use the labor theory of value to illustrate the interests and basis of international trade, and laid the foundation for the establishment of the theory of international trade of mutual benefit. The theory of absolute advantage advocated free trade, so it was a sharp weapon against mercantilism and accelerated the development of modern industry.

The biggest contribution of this theory is that it shows that international trade is not necessarily a "zero-sum game", which reflects the idea of "win-win" in international communication activities.

2, the theory of comparative advantage?

The theory of comparative advantage has inherited the scientific components of the theory of absolute advantage. Such as the labor theory of value, specialization, division of labor, free trade, etc., more importantly, the concept of comparative cost instead of the concept of absolute cost. So that the free trade policy has a more solid theoretical foundation, for the free trade policy at that time to achieve the final victory played a major role.?

Baidu Encyclopedia - International Trade Theory